1
EXHIBIT 10.31

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TRANSCOASTAL MARINE SERVICES, INC.

CREDIT AGREEMENT

Dated as of January 13, 1999

$15,000,000

BANK ONE, TEXAS, NATIONAL ASSOCIATION

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TABLE OF CONTENTS

Page

ARTICLE I

Definitions...............................................................................................1
Section 1.1 Definitions .................................................................................1
Section 1.2 Other Definitional Provisions ..............................................................18
Section 1.3 Computation of Time Periods ................................................................19

ARTICLE II

Advances/Letters of Credit ..............................................................................19
Section 2.1 Commitment ................................................................................19
Section 2.2 Note ......................................................................................19
Section 2.3 Repayment of Advances .....................................................................19
Section 2.4 Interest ..................................................................................19
Section 2.5 Additional Interest on LIBOR Advances .....................................................20
Section 2.6 Borrowing Procedure .......................................................................20
Section 2.7 Conversions and Continuations .............................................................20
Section 2.8 Use of Proceeds ...........................................................................21
Section 2.9 Fees ......................................................................................21
Section 2.10 Reduction or Termination of Commitments ...................................................22
Section 2.11 Letter of Credit Commitment ...............................................................22
Section 2.12 Issuance, Amendment and Renewal of Letters of Credit ......................................22
Section 2.13 Drawings and Reimbursements ...............................................................24
Section 2.14 Role of the Lender in Letter of Credit Transactions .......................................25
Section 2.15 Obligations Absolute ......................................................................25
Section 2.16 Cash Collateral Pledge ....................................................................26
Section 2.17 Letter of Credit Fees .....................................................................27
Section 2.18 Uniform Customs and Practice ..............................................................27
Section 2.19 Co-Borrowers; Joint and Several Liability .................................................27

ARTICLE III

Payments ................................................................................................31
Section 3.1 Method of Payment .........................................................................31
Section 3.2 Prepayment ................................................................................31

Section 3.3 Taxes......................................................................................32
Section 3.4 Computation of Interest ...................................................................34

ARTICLE IV

Yield Protection and Illegality .........................................................................34

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Section 4.1 Increased Costs .........................................................................34
Section 4.2 Limitation on Types of Advances .........................................................34
Section 4.3 Illegality ..............................................................................35
Section 4.4 Treatment of Affected Advances ..........................................................35
Section 4.5 Compensation ............................................................................35
Section 4.6 Capital Adequacy ........................................................................36

ARTICLE V

Security ..............................................................................................36
Section 5.1 Collateral ..............................................................................36
Section 5.2 Setoff ..................................................................................37

ARTICLE VI

Conditions Precedent ..................................................................................38
Section 6.1 Initial Advance .........................................................................38
Section 6.2 All Advances and Letters of Credit ......................................................39

ARTICLE VII

Representations and Warranties .........................................................................40
Section 7.1 Corporate Existence .....................................................................40
Section 7.2 Financial Statements ....................................................................40
Section 7.3 Corporate Action; No Breach .............................................................41
Section 7.4 Operation of Business ...................................................................41
Section 7.5 Litigation and Judgments ................................................................41
Section 7.6 Rights in Properties; Liens .............................................................41
Section 7.7 Enforceability ..........................................................................42
Section 7.8 Approvals ...............................................................................42
Section 7.9 Debt ....................................................................................42
Section 7.10 Taxes ...................................................................................42
Section 7.11 Use of Proceeds; Margin Securities ......................................................42
Section 7.12 ERISA ...................................................................................43
Section 7.13 Disclosure ..............................................................................43
Section 7.14 Subsidiaries ............................................................................43
Section 7.15 Agreements ..............................................................................43

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TABLE OF CONTENTS
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Section 7.16 Compliance with Laws .....................................................................43
Section 7.17 Inventory ................................................................................43
Section 7.18 Investment Company Act ...................................................................43
Section 7.19 Public Utility Holding Company Act .......................................................43
Section 7.20 Environmental Matters ....................................................................44
Section 7.21 Year 2000 Compliance .....................................................................45
Section 7.22 Insurance ................................................................................46
Section 7.23 Hedging Agreements .......................................................................46
Section 7.24 Restriction on Liens .....................................................................46
Section 7.25 Material Debt Agreements .................................................................46

ARTICLE VIII

Positive Covenants .....................................................................................47
Section 8.1 Reporting Requirements ...................................................................47
Section 8.2 Maintenance of Existence; Conduct of Business ............................................50
Section 8.3 Maintenance of Properties ................................................................50
Section 8.4 Taxes and Claims .........................................................................50
Section 8.5 Insurance ................................................................................50
Section 8.6 Inspection Rights ........................................................................50
Section 8.7 Keeping Books and Records ................................................................50
Section 8.8 Compliance with Laws .....................................................................51
Section 8.9 Compliance with Agreements ...............................................................51
Section 8.10 Further Assurances .......................................................................51
Section 8.11 ERISA ....................................................................................51
Section 8.12 Year 2000 Compliant ......................................................................51
Section 8.13 Subsidiary Guaranties and Pledge of Assets ...............................................52
Section 8.14 Post Closing Matters .....................................................................52

ARTICLE IX

Negative Covenants .....................................................................................52
Section 9.1 Debt .....................................................................................52
Section 9.2 Limitation on Liens ......................................................................53
Section 9.3 Mergers, Acquisitions, Etc ...............................................................53
Section 9.4 Restricted Payments ......................................................................54
Section 9.5 Investments ..............................................................................54

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TABLE OF CONTENTS
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Section 9.6 Limitation on Issuance of Capital Stock .................................................54
Section 9.7 Transactions With Affiliates ............................................................54
Section 9.8 Disposition of Assets ...................................................................55
Section 9.9 Sale and Leaseback ......................................................................55
Section 9.10 Prepayment of Debt ......................................................................55
Section 9.11 Nature of Business ......................................................................55
Section 9.12 Environmental Protection ................................................................55
Section 9.13 Accounting ..............................................................................55
Section 9.14 Compliance with ERISA ...................................................................55
Section 9.15 Proceeds of Note ........................................................................56
Section 9.16 Negative Pledge Agreements ..............................................................56
Section 9.17 Hedging Agreements ......................................................................56

ARTICLE X

Financial Covenants ...................................................................................56
Section 10.1 Consolidated Tangible Net Worth .........................................................56
Section 10.2 Capital Expenditures ....................................................................57
Section 10.3 Total Funded Debt to Capitalization .....................................................57
Section 10.4 Fixed Charge Coverage Ratio .............................................................57
Section 10.5 Senior Funded Debt to EBITDA Coverage Ratio .............................................57

ARTICLE XI

Default ...............................................................................................57
Section 11.1 Events of Default .......................................................................57
Section 11.2 Remedies ................................................................................59
Section 11.3 Performance by the Lender ...............................................................60

ARTICLE XII

Miscellaneous .........................................................................................60
Section 12.1 Expenses ................................................................................60
Section 12.2 Indemnification .........................................................................61
Section 12.3 Limitation of Liability .................................................................61
Section 12.4 No Duty .................................................................................61
Section 12.5 No Fiduciary Relationship ...............................................................62

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Section 12.6 Equitable Relief ........................................................................62
Section 12.7 No Waiver; Cumulative Remedies ..........................................................62
Section 12.8 Successors and Assigns ..................................................................62
Section 12.9 Survival ................................................................................63
Section 12.10 ENTIRE AGREEMENT ........................................................................63
Section 12.11 Amendments, Etc . .......................................................................63
Section 12.12 Maximum Interest Rate ...................................................................63
Section 12.13 Notices .................................................................................64
Section 12.14 Governing Law; Venue; Service of Process ................................................64
Section 12.15 Counterparts ............................................................................65
Section 12.16 Severability ............................................................................65
Section 12.17 Headings ................................................................................65
Section 12.18 Non-Application of Chapter 346 of Texas Finance Code ....................................65
Section 12.19 Construction ............................................................................65
Section 12.20 Independence of Covenants ...............................................................65
Section 12.21 JURY WAIVER .............................................................................65
Section 12.22 Arbitration .............................................................................66
Section 12.23 Confidentiality .........................................................................66

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CREDIT AGREEMENT

THIS CREDIT AGREEMENT, dated as of January 13,1999, is among
TRANSCOASTAL MARINE SERVICES, INC., a Delaware corporation (the "Parent") and
each of the Subsidiaries which is a party hereto (each individually, a
"BORROWER", and collectively, the "BORROWERS"), and BANK ONE, TEXAS, NATIONAL
ASSOCIATION (the "Lender").

ARTICLE I

DEFINITIONS

SECTION 1.1 DEFINITIONS. As used in this Agreement, the following terms
have the following meanings (such meanings to be equally applicable to, both the
singular and the plural forms of the terms defined):

"Accounts" means all accounts receivable of the Borrowers and
their Subsidiaries, or any of them.

"Advance" means an advance of funds by the Lender to any of
Borrowers pursuant to Article II.

"Advance Request Form" means a certificate, in substantially the
form of EXHIBIT "A," properly completed and signed by any Borrower
requesting an Advance.

"Affected Advances" shall have the meaning specified in Section
4.4.

"Affected Type" shall have the meaning specified in Section 4.4.

"Affiliate" means, as to any Person, any other Person (a) that
directly or indirectly, through one or more intermediaries, controls or
is controlled by, or is under common control with, such Person; (b)
that directly or indirectly beneficially owns or holds 10% or more of
any class of voting stock of such Person; or (c) 10% or more of the
voting stock of which is directly or indirectly beneficially owned or
held by the Person in question. The term "control" means the
possession, directly or indirectly, of the power to direct or cause
direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract, or otherwise;
provided, however, in no event shall the Lender be deemed an Affiliate
of any Borrower or any of their Subsidiaries.

"Agreement" means this Credit Agreement, as the same may be
amended, supplemented or modified from time to time.

"Applicable Base Rate Margin" means, for any day, with respect to
Base Rate Advances, the marginal interest rate over the Base Rate that
is applicable when any Applicable Rate based on the Base Rate is
determined under this Agreement.

"Applicable Lending Office" means the Domestic Lending Office of
Lender in the case of an Alternate Base Rate Advance, and Lender's
Eurodollar Lending Office in the case of a LIBOR Advance, or such other
lending offices as such Lender may from time to time specify to the
borrowers.

"Applicable LIBOR Margin" means, for any day, with respect to
LIBOR Advances, the marginal interest rate over the LIBOR Rate that is
applicable when any Applicable Rate based on the LIBOR Rate is
determined under this Agreement.

"Applicable Margin" means, for any day, (a) with respect to LIBOR
Advances, the marginal interest rate over the LIBOR Rate that is
applicable when any Applicable Rate based on the LIBOR Rate is
determined under this Agreement, and (b) with respect to Base Rate
Advances, the marginal interest rate over the Base Rate that is
applicable when any Applicable Rate based on the Base Rate is
determined under this Agreement. Absent an increase in the ratio of
Senior Funded Debt to EBITDA, the Applicable Margin shall not be less
than the LIBOR Rate plus 2.50% from the date hereof through June 30,
1999. Beginning July 1, 1999, the Applicable Margin is subject to
adjustment (upwards or downwards, as appropriate), as indicated in the
table and text set forth below:

RATIO OF COMMITMENT APPLICABLE MARGIN APPLICABLE MARGIN
SENIOR FUNDED DEBT TO FEE FOR LIBOR RATE FOR BASE
EBITDA (UNUSED) ADVANCES RATE ADVANCES
================================ ========== ================ =================

Less than or equal to 1.50 to 0.25% 1.75% 0.00%
1.00

Greater than 1.50 to 1.00, but 0.25% 2.00% 0.00%
less than or equal to 1.75 to
1.00

Greater than 1.75 to 1.00, but 0.25% 2.25% 0.25%
less than or equal to 2.00 to
1.00

Greater than 2.00 to 1.00 but .375% 2.50% 0.50%
less than or equal to 2.25 to
1.00

Greater than 2.25 to 1.00 but 0.50% 2.75% 0.50%
less than or equal to 2.50 to
1.00

On June 30, 1999, and on each calendar quarter end thereafter, the
Applicable Margin shall be adjusted to reflect the Applicable Margin
which is the Applicable Margin prescribed above for the ratio of the
Senior Funded Debt to EBITDA of the Parent and its Subsidiaries, on a
consolidated basis, for the most recently ended Rolling Period
demonstrated by the most recently delivered Compliance Certificate.
After each adjustment of the Applicable Margin in accordance herewith,
the new Applicable Margin shall apply to all Advances made or
outstanding thereafter until the next calendar quarter end that another
Applicable Margin is

applicable. Upon the request of the Lender, the Borrowers must
demonstrate to the reasonable satisfaction of the Administrative Lender
the required applicable ratio in order to obtain an adjustment to a
lower Applicable Margin. If the Borrowers fail to furnish to the Lender
any Compliance Certificate by the date required by this Agreement, then
the maximum Applicable Margin shall apply at all times after such date
for all Advances made or outstanding after such date until the
Borrowers furnish the required Compliance Certificate to the Lender.

"Applicable Rate" means: (a) during the period that an Advance is
a Base Rate Advance, the Base Rate plus the Applicable Base Rate
Margin; and (b) during the period that an Advance is a LIBOR Advance,
the LIBOR Rate plus the Applicable LIBOR Margin.

"Assignment" means that certain Assignment of Notes, Liens,
Security Interests and Loan Documents of Subordinated Lender in favor
of the Lender and Heller of even date herewith.

"Base Rate" at any time shall mean a fluctuating interest rate
per annum as shall be in effect from time to time which shall at all
times be equal to the higher of (a) the Federal Funds Rate as in effect
from time to time plus 1/2 of 1% per annum and (b) the Prime Rate as in
effect from time to time.

"Base Rate Advances" means Advances that bear interest at rates
based upon the Base Rate.

"Borrower" and "Borrowers" have the meaning specified in the
introductory paragraph of this Agreement.

"Borrowing" means a borrowing hereunder of the same Type made on
the same day by the Lender.

"Borrowing Base" means, at any time, an amount equal to the
lesser of (a) the sum of (x) 80% of Eligible Accounts, plus (y) 50% of
Eligible Inventory (but not to exceed $2,000,000.00), or (b)
$15,000,000, as the same may be reduced pursuant to Section 2.10 or
terminated pursuant to Sections 2.10 or 11.2.

"Borrowing Base Report" means a report described in Section
8.1 (1).

"Business Day" means (a) any day of the year except Saturday,
Sunday and any day on which commercial banks are authorized or required
to close in Houston, Texas, and, (b) if the applicable Business Day
relates to any LIBOR Advances, any day which is a Business Day
described in clause (a) above and which is also a day on which dealings
are carried out in the London interbank Eurodollar market.

"Capitalization" means the sum of Total Funded Debt plus Net
Worth.

"Capital Lease Obligations" means, as to any Person, the
capitalized amount, determined in accordance with GAAP, of the
obligations of such Person to pay rent or other amounts under a lease
of (or other agreement conveying the right to use) real and/or
personal property, which obligations are required to be classified and
accounted for as a capital lease on a balance sheet of such Person
under GAAP.

"Cash Collateral" means Dollars or marketable securities
acceptable to the Lender in its sole discretion that have been Cash
Collateralized for the benefit of the Lender.

"Cash Collateralize" means to pledge and deposit as collateral
for the Obligations pursuant to documentation in form and substance
satisfactory to the Lender (which documents are hereby consented to by
the Lender).

"Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor Federal tax code and the regulations,
promulgated and rulings issued thereunder, and any reference to any
statutory provision of the Code shall be deemed to be a reference to
any successor provision or provisions.

"Collateral" has the meaning specified in Section 5.1.

"Commitment" means obligation of the Lender to make Advances and
issue Letters of Credit hereunder in an aggregate principal amount at
any one time outstanding up to but not exceeding the lesser of: (a)
the Borrowing Base, or (b) $15,000,000, as the same may be reduced
pursuant to Section 2.10 or terminated pursuant to Sections 2.10 or
11.2.

"Compliance Certificate" means the Certificate of Compliance and
No Default described or referred to in Section 8.1(c).

"Consolidated" and "Consolidating" refer to the consolidation of
the accounts of the Parent and its Subsidiaries in accordance with
GAAP.

"Consolidated Net Income" means with respect to the Parent and
its Consolidated Subsidiaries, for any period, the aggregate of the
net income (or loss) of the Parent and its Consolidated Subsidiaries
after allowances for taxes for such period, determined on a
consolidated basis in accordance with GAAP; provided that there shall
be excluded from such net income (to the extent otherwise included
therein) the following: (i) the net income of any Person in which the
Parent or any Consolidated Subsidiary has an interest (which interest
does not cause the net income of such other Person to be consolidated
with the net income of the Parent and its Consolidated Subsidiaries in
accordance with GAAP), except to the extent of the amount of dividends
or distributions actually paid in such period by such other Person to
the Parent or to a Consolidated Subsidiary, as the case may be; (ii)
the net income (but not loss) of any Consolidated Subsidiary to the
extent that the declaration or payment of dividends or similar
distributions or transfers or loans by that Consolidated Subsidiary is
not at the time permitted by operation of the terms of its charter or
any agreement, instrument or Governmental Requirement applicable to
such Consolidated

Subsidiary, or is otherwise restricted or prohibited in each case
determined in accordance with GAAP; (iii) the net income (or loss) of
any Person acquired in a pooling-of-interests transaction for any
period prior to the date of such transaction; (iv) any extraordinary
gains or losses, including gains or losses attributable to Property
sales not in the ordinary course of business (net of fees and expenses
relating to such transaction); and (v) the cumulative effect of a
change in accounting principles and any gains or losses attributable
to writeups or writedowns of assets.

"Consolidated Subsidiaries" means each Subsidiary of the Parent
(whether now existing or hereafter created or acquired) the financial
statements of which shall be (or should have been) consolidated with
the financial statements of the Parent in accordance with GAAP.

"Consolidated Tangible Net Worth" means, at any particular
time, all amounts which, in conformity with GAAP, would be included as
stockholders' equity on a Consolidated balance sheet of the Parent and
its Subsidiaries; provided, however, there shall be added thereto the
Subordinated Debt and there shall be excluded therefrom: (a) any
amount at which shares of capital stock of the Parent appear as an
asset on the Parent's balance sheet, (b) goodwill, including any
amounts, however designated, that represent the excess of the purchase
price paid for assets or stock over the value assigned thereto, (c)
patents, trademarks, trade names, and copyrights, (d) deferred
expenses (except deferred expenses incurred in the ordinary course of
business), and (e) all other assets which are properly classified as
intangible assets.

"Continue," "Continuation," and "Continued" shall refer to the
continuation pursuant to Section 2.7 of a LIBOR Advance as a LIBOR
Advance from one Interest Period to the next Interest Period.

"Convert," "Conversion," and "Converted" shall refer to a
conversion pursuant to Section 2.7 or Article IV of one Type of
Advance into another Type of Advance.

"Debt" of any Person means at any time (without duplication) and
whether direct or contingent: (a) obligations for borrowed money which
(i) are evidenced by bonds, notes, debentures, loan agreements, credit
agreements or similar instruments or agreements and (ii) are or should
be shown on a balance sheet as debt in accordance with GAAP, (b)
obligations to pay the deferred purchase price of property or
services, (c) Capital Lease Obligations, (d) Debt or other obligations
of others guaranteed, (e) obligations secured by a Lien existing on
property owned by such Person, whether or not the obligations secured
thereby have been assumed by such Person or are non-recourse to the
credit of such Person, (f) reimbursement obligations (whether
contingent or otherwise) in respect of letters of credit, bankers'
acceptances, surety or other bonds and similar instruments, (g)
liabilities in respect of unfunded vested benefits under any Plan; (h)
Guarantees, and (i) Swap Transactions; provided, however, that Debt
shall not include (i) obligations under performance bonds, performance
guarantees, surety bonds, appeal bonds, security deposits or similar
obligations to the extent incurred in the ordinary course of business;
(ii) any trade

payables, other current liabilities and deferred credits (in each
case, other than with respect to borrowed money) incurred in the
ordinary course of business which are not overdue by more than 90 days
unless either (y) such trade payables, current liabilities or deferred
credits are being contested in good faith by appropriate proceedings
for which adequate reserves have been made in accordance with GAAP
(collectively, the "Contested Amounts"), or (z) the aggregate amount
of such overdue trade payables, current liabilities and deferred
credits (other than Contested Amounts) exceeds $500,000, in which case
such excess constitutes "Debt"; or (iii) debt arising from agreements
of the Borrowers providing for indemnification, adjustments, or
holdback of purchase price or similar obligations, in each case
assumed in connection with the acquisition or disposition of any
assets, business or subsidiary otherwise permitted hereunder.

"Default" means an Event of Default or the occurrence of an
event or condition which with notice or lapse of time or both would
become an Event of Default.

"Default Rate" means the lesser of (a) the sum of the Base Rate
in effect from day to day plus 4%, and (b) the Maximum Rate.

"Dickson Payment" shall have the meaning specified in Section
10.1.

"Dollars" and "$" means lawful money of the United States of
America.

"Domestic Lending Office" means Bank One, Texas, National
Association, 910 Travis, Suite 700, Houston, Texas 77002, or such
other office of Lender as Lender may from time to time specify to the
Borrowers.

"EBITDA" means, for any period, the sum of Consolidated Net
Income for such period plus the following expenses or charges to the
extent deducted from Consolidated Net Income in such period: interest,
taxes, depreciation, depletion and amortization, minus all non-cash
income (provided that no adjustments shall be made for non-cash items
required pursuant to accrual based GAAP accounting) added to
Consolidated Net Income in such period.

"Eligible Accounts" means, at any time, all Accounts created in
the ordinary course of business that are acceptable to the Lender
using its reasonable business judgment, in which the Lender has a
perfected first priority security interest (and subject only to such
Liens that are acceptable to the Lender) and which satisfy the
following conditions:

(a) The account complies with all applicable laws, rules, and
regulations, including, without limitation, usury laws, the Federal
Truth in Lending Act, and Regulation Z of the Board of Governors of
the Federal Reserve System;

(b) The account has been billed and has not been outstanding
for more than 90 days past the original date of invoice;

(c) The account was created in connection with (i) the sale
of goods by any Borrower or any domestic Subsidiary in the ordinary
course of business and such sale has been consummated and such goods
have been shipped and delivered and received by the account debtor, or
(ii) the performance of services by such Borrower or Subsidiary in the
ordinary course of business and the portion of such services billed by
such Borrower and its Subsidiaries have been completed and accepted by
the account debtor;

(d) The account arises from an enforceable contract, the
performance of which has been completed by any Borrower or any
Subsidiary for the portion billed;

(e) The account does not include any progress billings for
which billings the services have not been completed and accepted by
the account debtor;

(f) The account does not arise from the sale of any good that
is on a bill-and-hold, guaranteed sale, sale-or-return, sale on
approval, consignment, or any other repurchase or return basis;

(g) A Borrower or any Subsidiary has good and indefeasible
title to the account and the account is not subject to any Lien except
Liens in favor of the Lender and subordinated Liens satisfactory to
Lender in favor of Subordinated Lender;

(h) The account does not arise out of a contract with or order
from an account debtor that prohibits or makes void or unenforceable
the grant of a security interest by a Borrower or any Subsidiary to
the Lender in and to such account;

(i) The account is not subject to any setoff, counterclaim,
defense, dispute, recoupment, or adjustment other than normal
discounts for prompt payment or contra accounts as set forth below;

(j) The account debtor is not insolvent or the subject of any
bankruptcy or Insolvency Proceeding and has not made an assignment for
the benefit of creditors, suspended normal business operations,
dissolved, liquidated, terminated its existence, ceased to pay its
debts as they become due, or suffered a receiver or trustee to be
appointed for any of its assets or affairs;

(k) The account is not evidenced by chattel paper or an
instrument;

(l) The account debtor has not returned or refused to retain,
or otherwise notified a Borrower or any Subsidiary of any dispute
concerning, or claimed nonconformity of, any of the goods from the
sale of which the account arose;

(m) The account is not owed by an employee or Affiliate of
any Borrower or any Subsidiary;

(n) The account is payable in Dollars by the account debtor
(except with respect to foreign accounts that are otherwise Eligible
Accounts and are covered by a currency hedge agreement);

(o) The account shall be ineligible if the account debtor is
domiciled in any country other than the United States of America,
unless (x) billed to foreign subsidiaries of U.S. companies
satisfactory to Lender (and not to exceed $2,000,000 in the
aggregate), (y) insured satisfactory to Lender, or (z) supported by a
letter of credit satisfactory to Lender;

(p) All accounts owed by any account debtor shall be
ineligible if more than 15% of the aggregate balances then outstanding
on accounts owed by such account debtor and its subsidiaries to the
Borrowers and the Subsidiaries on a consolidated basis have been
outstanding for more than 90 days past the dates of their original
invoices; notwithstanding the above, however, an exception to this
provision is allowed for Royal Dutch/Shell Group, The Williams
Companies, Inc., and Chevron Corporation and/or their subsidiaries for
which ineligible accounts will be calculated based on specific
contracts rather than client totals;

(q) If the aggregate balances then outstanding on accounts
owed by any account debtor and its subsidiaries to the Borrowers and
the Subsidiaries on a consolidated basis constitute more than 25% of
the total accounts receivable of the Borrowers and the Subsidiaries on
a consolidated basis, then the portion of the accounts owed by such
account debtor in excess of the 25% concentration limit shall be
ineligible;

(r) The account shall be ineligible if the account debtor is
the United States of America or any department, agency, or
instrumentality thereof subject to the Federal Assignment of Claims
Act of 1940, as amended ("FACA"), and the FACA shall not have been
complied with; and

(s) The account is net of billings in excess of costs,
retainage, and bonded jobs.

The amount of the Eligible Accounts owed by an account debtor
to a Borrower or any Subsidiary shall be reduced by the amount of all
"contra accounts," past due credits and other obligations which are
owed by such Borrower or any Subsidiary to such account debtor.

"Eligible Assignee" means any commercial bank, savings and
loan association, savings bank, finance company, insurance company,
pension fund, mutual fund, or other financial institution (whether a
corporation, partnership, or other entity) acceptable to the Lender.

"Eligible Inventory" means at any time all inventory of work
in process then owned by any of the Borrowers and held for sale or
disposition in the ordinary course of business,

in which the Lender has a perfected, first priority security interest
(and subject only to such Liens that are acceptable to the Lender)
valued at the lower of cost or market.

"Environmental Laws" means any and all applicable foreign,
Federal, state, and local laws, regulations, statutes, ordinances,
rules, orders, decisions, decrees, judgments, permits, licenses,
authorizations and requirements pertaining to health, safety, or the
environment, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act
of 1976, 42 U.S.C. Section 6901 et seq., the Occupational Safety and
Health Act, 29 U.S.C. Section 651 et seq., the Clean Air Act, 42 U.S.C.
Section 7401 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et
seq., and the Toxic Substances Control Act, 15 U.S.C. Section 2601 et
seq., as such laws, regulations, statutes, ordinances, rules, orders,
decisions, decrees, judgments, permits, licenses, authorizations and
requirements may be amended or supplemented from time to time.

"Environmental Liabilities" means, as to any Person, all
liabilities, obligations, responsibilities, Remedial Actions, losses,
damages, punitive damages, consequential damages, treble damages,
costs, and expenses (including, without limitation, all reasonable
fees, disbursements and expenses of counsel, expert and consulting fees
and costs of investigation and feasibility studies), fines, penalties,
sanctions, and interest incurred as a result of any claim or demand, by
any Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, including any
Environmental Law, permit, order or agreement with any Governmental
Authority or other Person, arising from environmental, health or safety
conditions or the Release or threatened Release of a Hazardous Material
into the environment, resulting from the past, present, or future
operations of such Person or its subsidiaries.

"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute of
similar import, and the regulations and published interpretations
thereunder, as in effect from time to time.

"ERISA Affiliate" means any corporation or trade or business
(whether or not incorporated) which is a member of the same controlled
group of corporations (within the meaning of Section 414(b) of the
Code) as any Borrower or is under common control (within the meaning of
Section 414(c) of the Code) with any Borrower.

"Eurocurrency Liabilities" has the meaning prescribed to such
term in Regulation D of the Federal Reserve Board, as in effect from
time to time.

"Eurodollar Lending Office" means Bank One, Texas, National
Association, 910 Travis, Suite 700, Houston, Texas 77002, or such
other office of Lender as Lender may from time to time specify to the
Borrower.

"Event of Default" has the meaning specified in Section 11.1.

"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/16 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers on such day, as published by the Federal Reserve Bank of New
York on the Business Day next succeeding such day, provided that (a) if
the day for which such rate is to be determined is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the
next succeeding Business Day, and (b) if such rate is not so published
on such next succeeding Business Day, the Federal Funds Rate for any
day shall be the average of quotations for such day on such
transactions received by the Lender from three Federal Funds brokers of
recognized standing selected by it.

"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System, or any Federal agency or authority of the
United States of America from time to time succeeding to its function.

"Financing Transaction" means any Swap Transaction that is
intended primarily as a borrowing of funds.

"Fixed Charge Coverage" means all EBITDA plus all Operating
Lease expenses less cash taxes, less cash dividends, divided by the
sum of interest expense plus Operating Lease expenses plus contractual
principal reductions required during the period of calculation
(including the principal component of Capital Lease Obligation
payments) plus non-discretionary capital expenditures (not less than
$4,000,000 per annum). This ratio shall be calculated on a cumulative
quarterly basis beginning January 1, 1999 until such time as four
quarters have been reached at December 31, 1999, at which time the
covenant shall be calculated on a Rolling Period basis. The first
covenant test for the Fixed Charge Coverage ratio will be determined as
of March 31, 1999.

"GAAP" means generally accepted accounting principles, applied
on a consistent basis, as set forth in Opinions of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and/or in statements of the Financial Accounting Standards
Board and/or their respective successors and which are applicable in
the circumstances as of the date in question. Accounting principles are
applied on a "consistent basis" when the accounting principles applied
in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.

"Governmental Authority" means any nation or government, any
state or political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory, or administrative
functions of or pertaining to government.

"Government Requirement" means any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization or
other directive or requirement (whether or not having the force of

law), including, without limitation, Environmental Laws, energy
regulations and occupational, safety and health standards or controls,
of any Governmental Authority.

"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt
or other obligation of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt or
other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (b) entered into for the purpose
of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect the obligee against
loss in respect thereof (in whole or in part), provided that the term
"Guarantee" shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb
has a corresponding meaning.

"Guarantor" means, individually and/or collectively, any
Person who executes a Guaranty.

"Guaranty" means, individually and/or collectively, the
guaranty and/or guaranties executed and/or to be executed from time to
time in the future by any and all Subsidiaries of the Parent, any of
the Borrowers, or any of their Subsidiaries, in each case, acquired or
created after the date hereof, for the benefit of Lender, relating to
the Obligations in form satisfactory to Lender, as any of such
guaranties, from time to time, may be amended, modified, restated or
supplemented.

"Hazardous Material" means any substance, product, waste,
pollutant, material, chemical, contaminant, constituent, or other
material which is or becomes listed, regulated, or addressed under any
Environmental Law, including, without limitation, asbestos, petroleum,
and polychlorinated biphenyls.

"Hedging Agreements" means any commodity, interest rate or
currency swap, cap, floor, collar, forward agreement or other exchange
or protection agreements or any option with respect to any such
transaction.

"Heller" means HELLER FINANCIAL LEASING, INC., a Delaware
corporation.

"Heller Loan Documents" means that certain $35,000,000
promissory note executed by Borrowers payable to the order of Heller of
even date herewith in the original principal amount of $35,000,000 and
all documents executed in connection with or security for payment of
said $35,000,000 note, and whether now or hereafter executed.

"Honor Date" has the meaning specified in Section 2.13(a).

"Increased Costs" has the meaning specified in Section 4.1.

"Insolvency Proceeding" means any insolvency proceeding of the
types described in Sections 11.1(d) or (e).

"Insufficiency" means, with respect to any Plan, the amount,
if any, but which the present value of the accrued benefits under such
Plan exceeds the fair market value of the assets of such Plan allocable
to such benefits, provided that with respect to any offset arrangement
between any Plans, the assets of the Plans attributable to such offset
arrangement shall be aggregated in determining whether an Insufficiency
exists for the Plan to which the offset applies.

"Insurance Assignment" means the Assignment of Insurances of
HBH, Inc., a Louisiana corporation ("HBH") in favor of the Lender of
even date herewith, as the same may be amended, supplemented or
modified from time to time.

"Intercreditor Agreement" means that certain Intercreditor
Agreement of even date herewith by and among Borrowers, Heller and
Lender, as the same may be amended, supplemented, or modified from time
to time.

"Interest Period" means with respect to any LIBOR Advances,
each period commencing on the date such Advances are made or Converted
from Advances of another Type or, in the case of each subsequent,
successive Interest Period applicable to a LIBOR Advance, the last day
of the next preceding Interest Period with respect to such Advance, and
ending on the numerically corresponding day in the first, third or
sixth calendar month thereafter, as the Borrowers may select as
provided in Section 2.6 or 2.7 hereof, except that each such Interest
Period which commences on the last Business Day of a calendar month (or
on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business
Day of the appropriate subsequent calendar month.

Notwithstanding the foregoing: (a) each Interest Period
which would otherwise end on a day which is not a Business Day shall
end on the next succeeding Business Day (or, in the case of an Interest
Period for LIBOR Advances if such succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day);
(b) any Interest Period which would otherwise extend beyond the
Termination Date shall end on the Termination Date; (c) no more than
five (5) Interest Periods for LIBOR Advances shall be in effect at the
same time; and (d) no Interest Period for LIBOR Advances shall have a
duration of less than one month and, if the Interest Period for any
LIBOR Advances would otherwise be a shorter period, such Advances shall
not be available hereunder.

"Lender" has the meaning specified in the first paragraph of
this Agreement, and shall include any financial institution which
becomes a Lender pursuant to Section 12.8.

"Letter of Credit" means any standby letter of credit issued
by the Lender for the account of any of the Borrowers pursuant to
Section 2.11.

"Letter of Credit Commitment" means the commitment of the
Lender to issue Letters of Credit from the time issued or outstanding
under Section 2.11, in an aggregate amount not to exceed on any date
the amount of $4,000,000; provided that the Letter of Credit Commitment
is a part of the combined Commitments, rather than a separate
commitment.

"Letter of Credit Liabilities" means, at any time, the
aggregate face amount of all outstanding Letters of Credit.

"Letter of Credit Request Form" means an Advance Request Form
properly completed and signed by the applicable Borrower requesting
issuance of a Letter of Credit.

"LIBOR Advances" means Advances the interest rates on which
are determined on the basis of the LIBOR Rate.

"LIBOR Rate" means, for any LIBOR Advance for any Interest
Period therefor, the offered rate (rounded upwards, if necessary, to
the nearest 1/16 of 1%) for U.S. Dollar deposits of not less than
$1,000,000.00 for a period of time equal to each Interest Period as of
11:00 A.M. City of London, England time two London Business Days prior
to the first date of each Interest Period of the Notes as shown on the
display designated as "British Bankers Assoc. Interest Settlement
Rates" on the Telerate System ("TELERATE"), page 3750 or Page 3740, or
such other page or pages as may replace such pages on Telerate for the
purpose of displaying such rate. Provided, however, that if such rate
is not available on Telerate then such offered rate shall be otherwise
independently determined by Lender from an alternate, substantially
similar independent source available to Lender or shall be calculated
by Lender by a substantially similar methodology as that theretofore
used to determine such offered rate in Telerate. "LONDON BUSINESS DAY"
means any day other than a Saturday, Sunday or a day on which banking
institutions are generally authorized or obligated by law or executive
order to close in the City of London, England. Each change in the rate
to be charged on the Notes will become effective without notice on the
commencement of each Interest Period based upon the Index then in
effect. If the Reference Lender is not participating in any LIBOR
Advances during any Interest Period therefor (pursuant to Section 4.4
or for any other reason), the LIBOR Rate for such Advances for such
Interest Period shall be determined by reference to the amount of the
Advances which the Reference Lender would have made had it been
participating in such Advances.

"Lien" means any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation, assignment,
preference, priority, or other encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or
title retention agreement), whether arising by contract, operation of
law, or otherwise.

"Loan Documents" means this Agreement and all promissory
notes, security agreements, deeds of trust, vessel mortgages,
assignments, guaranties, and other instruments, documents, and
agreements executed and delivered pursuant to or in connection with
this Agreement, as such instruments, documents, and agreements may be
amended, modified, renewed, extended, or supplemented from time to
time.

"Maintenance Capital Expenditures" means all non-discretionary
capital expenditures required by Borrowers and their Subsidiaries to
maintain their current level of business operations, but not less than
$4,000,000 during any Rolling Period.

"Material Adverse Effect" means a material adverse effect on
any Borrower's and Subsidiary's ability considered as a whole to meet
its obligations to the Lender under the Loan Documents or a material
adverse effect on the business, operations, assets considered as a
whole or financial condition of any of the Borrowers or any of the
Subsidiaries considered as a whole.

"Maximum Rate" means, at any time and with respect to any
Lender, the maximum rate of interest under applicable law that such
Lender may charge the Borrowers. The Maximum Rate shall be calculated
in a manner that takes into account any and all fees, payments, and
other charges in respect of the Loan Documents that constitute interest
under applicable law. Each change in any interest rate provided for
herein based upon the Maximum Rate resulting from a change in the
Maximum Rate shall take effect without notice to the Borrowers at the
time of such change in the Maximum Rate. For purposes of determining
the Maximum Rate under Texas law, the applicable rate ceiling shall be
the indicated rate ceiling described in, and computed in accordance
with Chapter 303 of the Texas Finance Code.

"Monthly Date" means the last day of each calendar month in
each year, the first of which shall be January 31, 1999; provided,
however, that if any such day is not a Business Day, such Monthly Date
shall be the next succeeding Business Day.

"Multi-employer Plan" means a Multi-employer plan defined as
such in Section 4001(a)(3) of ERISA to which any Borrower or any ERISA
Affiliate is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an
obligation to make contributions.

"Multiple Employer Plan" means an employee benefit plan, other
than a Multiemployer Plan, subject to Title IV of ERISA to which any
Borrower or any ERISA Affiliate, and more than one employer other than
any Borrower or an ERISA Affiliate, is making or accruing an obligation
to make contributions or, in the event that any such plan has been
terminated, to which any Borrower or any ERISA Affiliate made or
accrued an obligation to make contributions during any of the five plan
years preceding the date of termination of such plan.

"Net Worth" means, at any particular time, all amounts which,
in conformity with GAAP, would be included as stockholder's equity on a
consolidated balance sheet of Parent and its Subsidiaries.

"Obligated Party" means any Guarantor or any other Person who
is or becomes party to any agreement that guarantees or secures payment
and performance of the Obligations or any part thereof.

"Obligations" means all obligations, indebtedness, and
liabilities of the Borrowers to the Lender, or any of them, arising
pursuant to any of the Loan Documents, now existing or hereafter
arising, whether direct, indirect, related, unrelated, fixed,
contingent, liquidated, unliquidated, joint, several, or joint and
several, including, without limitation, the obligations, indebtedness,
and liabilities of the Borrowers, or any of them, under this Agreement
and the other Loan Documents, obligations under Hedging Agreements of
the Borrowers and/or any of the Borrowers' Subsidiaries with the Lender
and/or any Affiliate of Lender and/or any of them, whether direct or
contingent, and all interest accruing on all of the above and all
attorneys' fees and other expenses incurred in the enforcement or
collection thereof.

"Operating Lease" means any lease (other than a lease
constituting a Capital Lease Obligation) of real or personal property.

"Other Taxes" has the meaning specified in Section 3.3(b).

"Payment Date" means the Monthly Date.

"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to all or any of its functions under ERISA.

"Parent" means TransCoastal Marine Services, Inc., a Delaware
corporation.

"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, firm or other entity, or a
government of any political subdivision or agency, department or
instrumentality thereof.

"Plan" means any employee benefit plan (other than a
Multi-employer Plan) which is (or, in the event that any such plan has
been terminated within five years after a transaction described in
Section 4069 of ERISA, was) maintained for employees of the Borrowers
or any ERISA Affiliate and is covered by Title IV of ERISA.

"PMSI Property" means any Property of the Borrowers or any
Subsidiary (a) now owned which is encumbered by a Permitted Lien in
respect of the financing thereof other than in favor of Heller or the
Subordinated Lender, or (b) hereafter acquired and encumbered by Liens
permitted under Section 9.2(g).

"Prime Rate" means, at any time, the rate of interest per
annum then most recently established by Bank One, Texas, N.A., as its
prime rate, which rate is not necessarily the

lowest or best rate that Bank One, Texas, N.A. may at any time and from
time to time charge its customers.

"Principal Office" means the principal office of the Lender,
presently located at 910 Travis Street, 7th Floor, Houston, Harris
County, Texas 77002.

"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.

"Release" means, as to any Person, any material release,
spill, emission, leaking, pumping, injection, deposit, disposal,
disbursement, leaching, or migration of Hazardous Materials into the
indoor or outdoor environment or into or out of property owned by such
Person, including, without limitation, the movement of Hazardous
Materials through or in the air, soil, surface water, ground water, or
property.

"Remedial Action" means all actions required to (a) clean up,
remove, treat, or otherwise address Hazardous Materials in the indoor
or outdoor environment, (b) prevent the Release or threat of Release or
minimize the further Release of Hazardous Materials so that they do not
migrate or endanger or threaten to endanger public health or welfare or
the indoor or outdoor environment, or (c) perform pre-remedial studies
and investigations and post-remedial monitoring and care.

"Responsible Officer" means, as to any Person, the Chief
Executive Officer, the President or any Executive Vice President or
Senior Vice President of such Person and, with respect to financial
matters, the term "Responsible Officer" shall mean the Chief Executive
Officer, Executive Vice President, Chief Financial Officer, or the
Director of Finance of such Person. Unless otherwise specified, all
references to a Responsible Officer herein shall mean a Responsible
Officer of the Parent.

"Revolving Credit Loan" means the Advances made or to be made
and the Letters of Credit issued and to be issued by the Lender to or
for the benefit of all or any of the Borrowers pursuant to the terms of
this Agreement.

"RICO" means the Racketeer Influenced and Corrupt Organization
Act of 1970, as amended from time to time.

"Rolling Period" shall mean each four-quarter period, ending
on the last day of each March, June, September and December.

"Security Agreement" means the Security Agreements of the
Borrowers and all their Subsidiaries in favor of the Lender, of even
date herewith, as the same may be amended, supplemented, or modified.

"Security Agreement (Pledge)" means the Security Agreement
(Pledge) of the Borrowers owning stock or other equity interests in a
Subsidiary in favor of the Lender, of

even date herewith, as the same may be amended, supplemented or
modified from time to time.

"Senior Funded Debt" means all obligations of any and/or all
of the Borrowers and their Subsidiaries for borrowed money from Lender
and Heller, Capital Lease Obligations, Letters of Credit, Guarantees,
and Guaranties.

"Ship Mortgage Act" means 46 U.S.C. Sections 31301-31343
(1994), as amended.

"Specific Fixed Collateral" means the undocumented Vessels
and other related fixed assets pertaining to both documented and
undocumented Vessels described on SCHEDULE "1".

"Subordinated Debt" means all Debt of any or all of Borrowers
which is subordinated pursuant to a subordination agreement on terms
satisfactory to the Lender, in Lender's sole discretion, including,
without limitation, the Debt as in effect (without amendment) as of the
date hereof, to Subordinated Lender subject to the Subordination
Agreement.

"Subordinated Lender" means the Joint Energy Development
Investments II Limited Partnership, a Delaware limited partnership.

"Subordinated Liens" means all Liens in favor of Subordinated
Lender that secure Subordinated Debt which are permitted under and
covered by the Subordination Agreement.

"Subordinated Loan Documents" means the loan documents in
favor of and/or payable to the Subordinated Lender (and any
successor(s) and/or assign(s)) which are subject to the Subordination
Agreement.

"Subordination Agreement" means that certain Subordination and
Intercreditor Agreement among the Lender, Heller, and Subordinated
Lender, of even date herewith, as the same may be amended,
supplemented, or modified from time to time.

"Subsidiary" means any corporation of which at least a
majority of the outstanding shares of stock having by the terms thereof
ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether or not at the time stock of
any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by any Borrower, the
Parent, or one or more of the Subsidiaries or by any Borrower, the
Parent, and one or more of the Subsidiaries.

"Swap Transaction" means any interest rate, currency or
commodity swap, collar or cap or other similar derivatives-related
transaction.

"Taxes" has the meaning specified in Section 3.3(a).

"Termination Date" means 11:00 A.M. Houston, Texas time on
January 12, 2002, or such earlier date and time on which the
Commitments terminate as provided in this Agreement.

"Termination Event" means (a) the occurrence with respect to
any Plan or Multiemployer Plan of a "reportable event," as such term is
described in Section 4043 of ERISA (other than a "reportable event,"
not subject to the provision for 30-day notice to the PBGC), or an
event described in Section 4062(e) of ERISA, or (b) the withdrawal by
any Borrower or any ERISA Affiliate from a Multiple Employer Plan
during a plan year in which it was a "substantial employer," as such
term is defined in Section 4001(a)(2) of ERISA, or the incurrence of
liability by any Borrower or any ERISA Affiliate under Section 4064 of
ERISA upon the termination of a Multiple Employer Plan or (c) the
distribution of a notice of intent to terminate a Plan pursuant to
Section 4041(a)(2) of ERISA or the treatment of a Plan amendment as a
termination under Section 4041 of ERISA, or (d) the institution of
proceedings to terminate a Plan by the PBGC under Section 4042 of
ERISA, or (e) any other event or condition which might constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan.

"Total Funded Debt" means any Debt that by its terms is
payable more than one year from the date of origination thereof or
which is renewable at the option of the obligor beyond one year from
such date of origination.

"Type" means any type of Advance (i.e., Base Rate Advance or
LIBOR Advance).

"UCC" means the Uniform Commercial Code as in effect in the
State of Texas.

"Vessels" means the vessels described on SCHEDULE "2".

"Vessel Mortgage" means the First Preferred Fleet Mortgage of
HBH in favor of the Lender covering the U.S. flagged and documented
Vessels "Missy Ann", "BH-7", "BH-103", "BH-101", and "Danny Boy II," of
even date herewith, as the same may be amended, supplemented or
modified from time to time.

"Withdrawal Liability" has the meaning specified for such term
in Part I of Subtitle E of Title V of ERISA.

"Year 2000 Compliant" shall mean, in regard to any entity,
that all software, hardware, firmware, equipment, fixtures, goods or
systems utilized by or material to the business operations or financial
condition of such entity, will properly perform date-sensitive
functions before, during and after the year 2000.

SECTION 1.2 OTHER DEFINITIONAL PROVISIONS. The words "hereof,"
"herein," and "hereunder" and words of similar import referring to this
Agreement refer to this Agreement as a whole and not to any particular provision
of this Agreement. Unless otherwise specified, all Article and Section
references pertain to this Agreement. All accounting terms not specifically
defined

herein shall be construed in accordance with GAAP. Terms used herein that are
defined in the UCC, unless otherwise defined herein, shall have the meanings
specified in the UCC. The term "including" means "including, without
limitation."

SECTION 1.3 COMPUTATION OF TIME PERIODS. In the computation of periods
of time from a specified date to a later specified date, the word "from" means
"from and including" and the words "until" and "to" each means "to but
excluding." Unless otherwise indicated, all references to a particular time are
references to Houston, Texas time.

ARTICLE II

ADVANCES/LETTERS OF CREDIT

SECTION 2.1 COMMITMENT. Subject to the terms and conditions of this
Agreement, the Lender agrees to make one or more Advances to the Borrowers from
time to time from the date hereof to and including the Termination Date in an
aggregate principal amount at any time outstanding up to but not exceeding the
amount of the Commitment as then in effect provided that the aggregate amount
of all Advances outstanding shall not exceed the Commitment minus the sum of
the outstanding Letter of Credit Liabilities. Subject to the foregoing
limitations, and the other terms and provisions of this Agreement, the
Borrowers may borrow, repay, and reborrow hereunder the amount of the
Commitment by means of Base Rate Advances and LIBOR Advances and, until the
Termination Date, the Borrowers may Convert Advances of one Type into Advances
of another Type. Advances of each Type made by each Lender shall be made and
maintained at such Lender's Applicable Lending Office for Advances of such
Type.

SECTION 2.2 NOTE. The obligation of the Borrowers to repay the Lender
for Advances made by the Lender and interest thereon shall be evidenced by a
Note executed jointly and severally by the Borrowers, payable to the order of
the Lender, in the original principal amount of the Commitment as originally in
effect, and dated the date hereof.

SECTION 2.3 REPAYMENT OF ADVANCES. The Borrowers shall repay the
unpaid principal amount of all Advances on the Termination Date.

SECTION 2.4 INTEREST. The unpaid principal amount of the Advances
shall bear interest at a varying rate per annum equal from day to day to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate. If at any time the
Applicable Rate for any Advance shall exceed the Maximum Rate, thereby causing
the interest accruing on such Advance to be limited to the Maximum Rate, then
any subsequent reduction in the Applicable Rate for such Advance shall not
reduce the rate of interest on such Advance below the Maximum Rate until the
aggregate amount of interest accrued on such Advance equals the aggregate
amount of interest which would have accrued on such Advance if the Applicable
Rate had at all times been in effect. Accrued and unpaid interest on the
Advances shall be due and payable as follows:

(i) in the case of Base Rate Advances or LIBOR Advances, on
each Payment Date and on the Termination Date; and

(ii) contemporaneously with the payment or prepayment of
any Advance or the Conversion of any Advance to an Advance of another Type (but
only on the principal amount so paid, prepaid, or Converted).

Notwithstanding the foregoing, the Borrowers will pay to the Lender, interest
at the Default Rate on any principal of any Advance made by Lender, and (to the
fullest extent permitted by law) on any other amount payable by the Borrowers
hereunder, under any Loan Document, or under the Note, for the period
commencing on the date of an Event of Default until the same is paid in full or
all Events of Default are cured or waived.

SECTION 2.5 ADDITIONAL INTEREST ON LIBOR ADVANCES. If any Lender is
required under regulations of the Federal Reserve Board to maintain reserves
with respect to liabilities or assets consisting of or including Eurocurrency
Liabilities, and if as a result thereof there is an increase in the cost to the
Lender of agreeing to make or making, funding or maintaining LIBOR Advances,
then the Borrowers shall from time to time, upon demand by such Lender, pay to
the Lender for the account of the Lender additional amounts as additional
interest sufficient to compensate the Lender for such increased cost. A
certificate as to the basis for such increased cost, in reasonable detail and
specifying the amount requested submitted to the Borrowers and the Lender by
such Lender shall be conclusive and binding absent manifest error.

SECTION 2.6 BORROWING PROCEDURE. Any Borrower shall give the Lender
notice by means of an Advance Request Form of each requested Advance at least
one (1) Business Days before the requested date of each Base Rate Advance, and
at least three (3) Business Days before the requested date of each LIBOR
Advance, specifying: (a) the requested date of such Advance (which shall be a
Business Day), (b) the amount of such Advance, (c) the Type of the Advance, and
(d) in the case of a LIBOR Advance, the duration of the Interest Period for
such Advance. The Lender at its option may accept telephonic requests for
Advances, provided that such acceptance shall not constitute a waiver of the
Lender's right to delivery of an Advance Request Form in connection with
subsequent Advances. Any telephonic request for an Advance by any Borrower
shall be promptly confirmed by submission of a properly completed Advance
Request Form to the Lender. Each Advance shall be in a minimum principal amount
of $1,000,000 or an integral multiple thereof. The aggregate principal amount
of LIBOR Advances having the same Interest Period shall be at least equal to
$1,000,000. Subject to fulfillment of all the applicable terms and conditions
of this Agreement, the Lender will make each Advance available to the
applicable Borrower by depositing the same, in immediately available funds, in
an account of the applicable Borrower (designated by the applicable Borrower)
maintained with the Lender at the Principal Office. All notices under this
Section shall be irrevocable and shall be given not later than 11:00 A.M. on
the day which is not less than the number of Business Days specified above for
such notice. Each Advance request shall be irrevocable and binding on the
Borrowers.

SECTION 2.7 CONVERSIONS AND CONTINUATIONS.

(a) The Borrowers shall have the right from time to time to
Convert all or part of an Advance of one Type into an Advance of another Type
or to Continue LIBOR Advances by giving the Lender written notice at least one
(1) Business Days before Conversion into a Base Rate

Advance, and at least three (3) Business Days before Conversion into or
Continuation of a LIBOR Advance, specifying: (i) the Conversion or Continuation
date, (ii) the amount of the Advance to be Converted or Continued, (iii) in the
case of Conversions, the Type of Advance to be Converted into, and (iv) in the
case of a Continuation of or Conversion into a LIBOR Advance, the duration of
the Interest Period applicable thereto; provided that (A) LIBOR Advances may
only be Converted on the last day of the Interest Period, and (B) except for
Conversions into Base Rate Advances, no Conversions shall be made while a
Default has occurred and is continuing. All notices under this Section shall be
irrevocable and shall be given not later than 11:00 A.M. on the day which is
not less than the number of Business Days specified above for such notice.

(b) If the Borrowers shall fail to give the Lender the notice
as specified above for Continuation or Conversion of a LIBOR Advance prior to
the end of the Interest Period with respect thereto, such LIBOR Advance shall
be Converted automatically into a Base Rate Advance on the last day of the then
current Interest Period for such LIBOR Advance.

(c) If the aggregate unpaid principal amount of Advances
comprising any Borrowing of LIBOR Advances shall be reduced, by payment or
prepayment or otherwise, to less than $1,000,000, such Advances shall
automatically Convert, on the last day of the then existing Interest Period for
such Advances, to Base Rate Advances, unless the Borrowers have selected to
continue such Advances as LIBOR Advances by selecting a new Interest Period
therefor in accordance with the provisions contained in the definition of
"Interest Period" in Section 1.1 commencing on such day and the sum of the
outstanding principal amount of such Advances plus the outstanding principal
amount of each other Borrowing that is being Converted into or Continued as,
LIBOR Advances on such day with the same Interest Period as such Advances is at
least $1,000,000.

SECTION 2.8 USE OF PROCEEDS. The proceeds of Advances shall be used by
the Borrowers for working capital in the ordinary course of business and to
support the issuance of Letters of Credit issued in the ordinary course of
business.

SECTION 2.9 FEES.

(a) The Borrowers jointly and severally agree to pay to the
Lender a commitment fee on the daily average unused amount of the Commitment
for the period from and including the date of this Agreement to and including
the Termination Date, at the percentage rate per annum in the "Commitment Fee
(unused)" column of the chart in the Definition of Applicable Margin
corresponding to the applicable "Ratio of Senior Funded Debt" to EBITDA column
in said chart, based on a 365-day year and the actual number of days elapsed.
Accrued commitment fee shall be payable in arrears on each Quarterly Payment
Date and on the Termination Date.

(b) The Borrowers agree to pay to the Lender a facility fee
of $75,000.00 contemporaneously with the execution of this Agreement.

(c) The Borrowers jointly and severally agree that if a
payment is ten (10) or more days late, Borrowers will pay five percent (5.0%)
of the regularly scheduled payment or $25.00,

whichever is greater, up to the maximum amount of $1,500.00 per late charge,
but in no event shall such late payment fee exceed the Maximum Rate.

SECTION 2.10 REDUCTION OR TERMINATION OF COMMITMENTS. The Borrowers
shall have the right to terminate in whole or reduce in part the unused portion
of the Commitments upon at least three (3) Business Days' prior notice (which
notice shall be irrevocable) to the Lender specifying the effective date
thereof, whether a termination or reduction is being made, and the amount of
any partial reduction, provided that each partial reduction shall be in the
amount of $3,000,000 or an integral multiple thereof and the Borrowers shall,
jointly and severally, simultaneously prepay the amount by which the unpaid
principal amount of the Advances exceeds the Commitments (after giving effect
to such notice) plus accrued and unpaid interest on the principal amount so
prepaid. The Commitments may not be reinstated after they have been terminated
or reduced. If at any time the sum of the outstanding principal balance under
the Note exceeds the Borrowing Base or the Commitment, then the Borrowers shall
immediately (and in any event within three Business Days) prepay the amount of
such excess for application toward the reduction of outstanding principal
balance of the Note. Such prepayment shall be made together with the payment of
accrued interest upon the amount prepaid.

SECTION 2.11 LETTER OF CREDIT COMMITMENT. Subject to the terms and
conditions of this Agreement, the Lender agrees to issue one or more Letters of
Credit for the account of the Borrowers from time to time from the date hereof
to and including the Termination Date and to honor drafts under the Letters of
Credit; provided, however, that the Lender shall not be obligated to issue any
Letter of Credit if as of the date of issuance of such Letter of Credit (the
"Issuance Date"), the outstanding Letter of Credit Liabilities (taking into
account such proposed Letter of Credit) exceeds the lesser of (i) the Letter of
Credit Commitment, or (ii) an amount equal to the Commitment minus the sum of
the outstanding Advances. Each Letter of Credit shall have an expiration date
not to exceed the Termination Date, shall be payable in Dollars, shall have a
minimum face amount of $50,000, must support a transaction that is entered into
in the ordinary course of the applicable Borrower's business, must otherwise be
reasonably satisfactory in form and substance to the Lender, and shall be
issued pursuant to such documents and instruments (including, without
limitation, the Lender's standard application for issuance of letters of credit
as then in effect) as the Lender may require. No Letter of Credit shall require
any payment by the Lender to the beneficiary thereunder pursuant to a drawing
prior to the one (1) Business Day following presentment of a draft and any
related documents to the Lender.

SECTION 2.12 ISSUANCE, AMENDMENT AND RENEWAL OF LETTERS OF CREDIT.

(a) Each Letter of Credit shall be issued upon the irrevocable written
request of a Borrower received by the Lender at least five (5) Business Days
(or such shorter time as the Lender may agree in a particular instance in its
sole discretion) prior to the proposed date of issuance. Each such request for
issuance of a Letter of Credit shall be sent by electronic transfer or
facsimile, confirmed immediately in an original writing, in the form of a
Letter of Credit Request Form, and shall specify in form and detail
satisfactory to the Lender: (i) the proposed date of issuance of the Letter of
Credit (which shall be a Business Day); (ii) the face amount of the Letter of
Credit; (iii) the expiry date of the Letter of Credit; (iv) the name and
address of the beneficiary thereof; (v) the

conditions permitting a drawing or drawings thereunder; (vi) the form of the
Letter of Credit; (vii) whether such Letter of Credit shall permit a single
drawing or multiple drawings; and (viii) such other matters as the Lender may
reasonably require.

(b) At least one Business Day prior to the Issuance of any Letter of
Credit, the Borrower will confirm with the Lender (by telephone or in writing)
that the Lender has received a copy of the Letter of Credit Request from the
Borrowers and, if not, the Borrower will provide the Lender with a copy
thereof. Unless the Lender has received notice on or before the Business Day
immediately preceding the date the Lender is to Issue a requested Letter of
Credit from the Borrower (i) directing the Lender not to issue such Letter of
Credit because such Issuance is not then permitted under Section 2.11; or (ii)
that one or more conditions specified in Article VI, are not then satisfied;
then, subject to the terms and conditions hereof, the Lender shall, on the
requested date, issue a Letter of Credit for the account of the applicable
Borrower in accordance with the Lender's usual and customary business
practices.

(c) From time to time while a Letter of Credit is outstanding and
prior to the Termination Date, the Lender will, upon the written request of a
Borrower received by the Lender at least five (5) Business Days (or such
shorter time as the Lender may agree in a particular instance in its sole
discretion) prior to the proposed date of amendment, amend any Letter of Credit
issued by it. Each such request for amendment of a Letter of Credit shall be
made by electronic transfer or facsimile, confirmed immediately in an original
writing or by electronic transfer, made in the form of a Letter of Credit
Request Form and shall specify in form and detail satisfactory to the Lender:
(i) the Letter of Credit to be amended; (ii) the proposed date of amendment of
the Letter of Credit (which shall be a Business Day); (iii) the nature of the
proposed amendment; and (iv) such other matters as the Lender may require. The
Lender shall be under no obligation to amend any Letter of Credit if: (A) the
Lender would have no obligation at such time to issue such Letter of Credit in
its amended form under the terms of this Agreement; or (B) the beneficiary of
any such Letter of Credit does not accept the proposed amendment to the Letter
of Credit.

(d) While a Letter of Credit is outstanding and prior to the
Termination Date, at the option of the Borrowers and upon the written request
of the Borrowers received by the Lender at least five (5) days (or such shorter
time as the Lender may agree in a particular instance in its sole discretion)
prior to the proposed date of notification of renewal, the Lender shall be
entitled to authorize the automatic renewal of any Letter of Credit issued by
it. Each such request for renewal of a Letter of Credit shall be made by
electronic transfer or facsimile, confirmed immediately in an original writing
or by electronic transfer, in the form of a Letter of Credit Request Form, and
shall specify in form and detail reasonably satisfactory to the Lender: (i) the
Letter of Credit to be renewed; (ii) the proposed date of notification of
renewal of the Letter of Credit (which shall be a Business Day); (iii) the
revised expiry date of the Letter of Credit; and (iv) such other matters as the
Lender may reasonably require. Notwithstanding any other provision to the
contrary, the Lender shall be under no obligation to renew any Letter of Credit
if: (A) the Lender would have no obligation at such time to issue or amend such
Letter of Credit in its renewed form under the terms of this Agreement, (B) the
beneficiary of any such Letter of Credit does not accept the proposed renewal
of the Letter of Credit, (C) if the Letter of Credit would be extended past the
Termination Date, or (D) if any of the conditions of Section 6.2 have not been
satisfied. If any outstanding Letter

of Credit shall provide that it shall be automatically renewed unless the
beneficiary thereof receives notice from the Lender that such Letter of Credit
shall not be renewed, and if at the time of renewal the Lender would be
entitled to authorize the automatic renewal of such Letter of Credit in
accordance with this Section 2.12(d) upon the request of the Borrowers but the
Lender shall not have received any Letter of Credit Request Form from the
Borrowers with respect to such renewal or other written direction by the
Borrowers with respect thereto, the Lender shall nonetheless be permitted to
allow such Letter of Credit to renew, and the Borrowers hereby authorize such
renewal, and, accordingly, the Lender shall be deemed to have received a Letter
of Credit Request Form from the Borrowers requesting such renewal.

(e) This Agreement shall control in the event of any conflict with any
Letter of Credit related document (other than any Letter of Credit).

(f) The Borrower will also deliver to the Lender, concurrently or
promptly following its delivery of a Letter of Credit, or amendment to or
renewal of a Letter of Credit, to an advising bank or a beneficiary, a true and
complete copy of each such Letter of Credit or amendment to or renewal of a
Letter of Credit.

SECTION 2.13 DRAWINGS AND REIMBURSEMENTS.

(a) In the event of any request for a drawing under a Letter of Credit
by the beneficiary or transferee thereof, the Lender will promptly notify the
Borrowers. Any notice given by the Lender pursuant to this Section 2.13(a) may
be oral if immediately confirmed in writing (including by facsimile); provided
that the lack of such an immediate confirmation shall not affect the
conclusiveness or binding effect of such notice. The Borrowers shall reimburse
the Lender prior to 12 Noon A.M., on each date that any amount is paid by the
Lender under any Letter of Credit (each such date, an "HONOR DATE"), in an
amount equal to the amount so paid by the Lender. In the event the Borrowers
fail to reimburse the Lender for the full amount of any drawing under any
Letter of Credit by 12 Noon A.M. on the Honor Date, the Borrowers shall be
deemed to have requested that Base Rate Advances be made by the Lender to be
disbursed on the Honor Date under such Letter of Credit, subject to the amount
of the unutilized portion of the Commitment and subject to the conditions set
forth in Section 6.2.

(b) With respect to any unreimbursed drawing that is not converted
into Advances consisting of Base Rate Advances to the Borrowers in whole or in
part, because of the Borrowers' failure to satisfy the conditions set forth in
Section 6.2 or for any other reason, the Borrowers shall be deemed to have
incurred from the Lender a Letter of Credit Advance (herein so called) in the
amount of such drawing, which Letter of Credit Advance shall be due and payable
on demand (together with interest) and shall bear interest at a rate per annum
equal to the Default Rate for the period from and including the date of such
drawing to but excluding the date of the Letter of Credit Advance, together
with all accrued, unpaid interest thereon, until paid in full.

SECTION 2.14 ROLE OF THE LENDER IN LETTER OF CREDIT TRANSACTIONS.

(a) Lender and the Borrowers agree that, in paying any drawing under a
Letter of Credit, the Lender shall not have any responsibility to obtain any
document (other than any sight draft and certificates expressly required by the
Letter of Credit) or to ascertain or inquire as to the validity or accuracy of
any such document or the authority of the Person executing or delivering any
such document.

(b) No Lender-related Person nor any of the respective correspondents,
participants or assignees of the Lender shall be liable for: (i) any action
taken or omitted in the absence of gross negligence or willful misconduct; or
(ii) the due execution, effectiveness, validity or enforceability of any Letter
of Credit related document.

(c) The Borrowers hereby assume all risks of the acts or omissions of
any beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not,
preclude the Borrowers' pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. No
Lender-related Person, nor any of the respective correspondents, participants
or assignees of the Lender, shall be liable or responsible for any of the
matters described in clauses (a) through (g) of Section 2.16; provided,
however, anything in such clauses to the contrary notwithstanding, that the
Borrowers may have a claim against the Lender, and the Lender may be liable to
the Borrowers, to the extent, but only to the extent, of any direct, as opposed
to consequential or exemplary, damages suffered by the Borrowers which the
Borrowers prove were caused by the Lender's willful misconduct or gross
negligence or the Lender's willful failure to pay under any Letter of Credit
after the presentation to it by the beneficiary of a sight draft and
certificate(s) strictly complying with the terms and conditions of a Letter of
Credit. In furtherance and not in limitation of the foregoing: (i) the Lender
may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) the Lender shall not be responsible for
the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason.

SECTION 2.15 OBLIGATIONS ABSOLUTE. The Obligations of the Borrowers
under this Agreement and any Letter of Credit related document to reimburse the
Lender for a drawing under a Letter of Credit, and to repay any Letter of
Credit Advance and any drawing under a Letter of Credit converted into an
Advance, shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement and each such other Letter of
Credit related document under all circumstances, including the following:

(a) any lack of validity or enforceability of this Agreement or any
Letter of Credit related document or any provision thereof,

(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of any or all of the Borrowers in
respect of any Letter of Credit or any other

amendment or waiver of or any consent to departure from all or any of the Letter
of Credit related document;

(c) the existence of any claim, set-off, defense or other right that
any Borrower may have at any time against any beneficiary or any transferee of
any Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the Lender or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby or by the
Letter of Credit related documents or any unrelated transaction;

(d) any draft, demand, certificate or other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect; or any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any Letter of Credit;

(e) any payment by the Lender under any Letter of Credit against
presentation of a draft or certificate that does not strictly comply with the
terms of any Letter of Credit; or any payment made by the Lender under any
Letter of Credit to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any
transferee of any Letter of Credit, including any arising in connection with
any Insolvency Proceeding;

(f) any exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from any other
guarantee, for all or any of the obligations of any Borrower in respect of any
Letter of Credit; or

(g) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that might
otherwise constitute a defense available to, or a discharge of, any Borrower or
a Guarantor, except for errors and omissions caused by an Lender's gross
negligence or willful misconduct.

SECTION 2.16 CASH COLLATERAL PLEDGE. Upon (a) the request of the
Lender, (i) if the Lender has honored any full or partial drawing request on
any Letter of Credit and such drawing has resulted in a Letter of Credit
Advance hereunder, or (ii) if, as of the Termination Date, any Letters of
Credit may for any reason remain outstanding and partially or wholly undrawn,
or (b) the occurrence of the circumstances described in Section 3.2(b)
requiring any Borrower to Cash Collateralize Letters of Credit, then, the
Borrowers shall immediately Cash Collateralize the Letter of Credit Liabilities
in an amount equal to such Letter of Credit Liabilities. The Borrowers hereby
grant the Lender, for the benefit of the Lender, a security interest in all
such Cash Collateral. Cash Collateral shall be maintained in blocked,
interest-bearing deposit accounts at the Lender. The Borrowers agree to enter
into documentation evidencing such security interest in the Cash Collateral, in
form and substance satisfactory to Lender in Lender's reasonable discretion.

SECTION 2.17 LETTER OF CREDIT FEES.

(a) The Borrowers shall pay to the Lender a floating letter of credit
fee with respect to the Letters of Credit equal to the greater of (i) $2,500 or
(ii) the Applicable LIBOR Margin (provided, however, if not available pursuant
to the terms hereof, then 2.75%) per annum upon the face amount of outstanding
Letters of Credit, computed on a quarterly basis in arrears on the last
Business Day of each calendar quarter based upon Letters of Credit outstanding
for that quarter as calculated by the Lender. Such letter of credit fees shall
be due and payable quarterly in arrears on the last Business Day of each
calendar quarter during which Letters of Credit are outstanding, commencing on
the first such date to occur after the date hereof, through the Termination
Date, with the final payment to be made on the Termination Date (or such later
expiration date).

(b) The Borrowers shall pay to the Lender from time to time on demand
the normal and customary issuance, presentation, amendment and other customary
processing fees, and other standard costs and charges, of the Lender relating
to letters of credit as from time to time in effect.

SECTION 2.18 UNIFORM CUSTOMS AND PRACTICE. The Uniform Customs and
Practice for Documentary Credits as published by the International Chamber of
Commerce most recently at the time of issuance of any Letter of Credit shall
(unless otherwise expressly provided in the Letters of Credit) apply to the
Letters of Credit.

SECTION 2.19 CO-BORROWERS; JOINT AND SEVERAL LIABILITY.

(a) Each Borrower acknowledges and agrees that it has determined
independently that, in light of the conduct of the business of Borrowers as an
integrated operation and a common enterprise that requires financing on a basis
permitting the availability of credit to each Borrower, it will benefit
specifically, directly and materially from the advances of credit contemplated
by the Lender's financing and that the value of the consideration it is
receiving from the Term Loan made hereunder is reasonably worth at least the
sum at which it is taken by such Borrower.

(b) It is expressly agreed and understood by each Borrower that the
Lender shall have no responsibility to inquire into the apportionment,
allocation, or disposition of the Advances made to Borrowers. All Advances are
to be made for the collective account of Borrowers.

(c) Each Borrower hereby jointly, severally, irrevocably, and
unconditionally guarantees to the Lender the full and prompt payment of each of
the obligations under the Loan Documents by each other Borrower and the
performance by each other Borrower of such Borrower's obligations hereunder and
thereunder and shall fully and promptly perform all of the Obligations and
agrees, as a primary obligation, to indemnify the Lender on demand for and
against any loss incurred by the Lender as a result of any voidable,
unenforceable, or ineffective provision herein or in any of the Loan Documents,
for any reason whatsoever, whether or not known to the Lender, or any Person,
the amount of such loss being in the amount to which the Lender would otherwise
have been entitled to recover from Borrowers. This is a guaranty of payment and
of performance and not of collection.

(d) Each Borrower consents and agrees that the Lender may, at any time
and from time to time, without notice or demand, except as otherwise required
herein, whether before or after any actual or purported termination,
repudiation or revocation of any of the Loan Documents, including this
Agreement, by any one or more Borrowers, and without affecting the
enforceability or continuing effectiveness hereof as to each Borrower, agree
with one or more Borrowers or any other Person, to: (i) supplement, restate,
compromise, modify, amend, increase, decrease, extend, discharge, renew,
accelerate, or otherwise change the time for payment or the terms of the
Obligations or any part thereof, including any increase or decrease of the
rate(s) of interest thereon; (ii) supplement, restate, modify, amend, increase,
decrease or waive, or enter into or give any agreement, approval, or consent
with respect to, the Obligations or any part thereof, or any of the Loan
Documents or any additional security or guarantees, or any condition, covenant,
default, remedy, right, representation or term thereof or thereunder; (iii)
accept new or additional instruments, documents or agreements in exchange for
or relative to any of the Loan Documents or the Obligations or any part
thereof; (iv) accept partial payments on the Obligations; (v) receive and hold
additional security or guarantees for the Obligations or any part thereof;
(vi) release, reconvey, terminate, waive, abandon, fail to perfect,
subordinate, exchange, substitute, transfer or enforce any security or
guarantees, and apply any security and direct the order or manner of the sale
thereof as the Lender in its sole and absolute discretion may determine; (vii)
release any Person from any personal liability with respect to the Obligations
or any part thereof; (viii) settle, discharge, release on terms satisfactory
to the Lender or by operation of applicable laws or otherwise liquidate or
enforce any Obligations and any security therefor or guaranty thereof in any
manner, consent to the transfer of any security and bid and purchase at any
sale; (ix) consent to the merger, change or any other restructuring or
termination of the corporate existence of any Borrower and correspondingly
restructure the Obligations, and any such merger, change, restructuring or
termination shall not affect the liability of any Borrower or the continuing
effectiveness hereof, or the enforceability hereof with respect to all or any
part of the Obligations, or (x) take or refrain from taking any other action as
the Lender, in its sole and absolute discretion, may elect, or any or some of
the foregoing.

(e) The Lender may enforce this Agreement independently as to each
Borrower and Guarantor and independently of any other remedy or security the
Lender at any time may have or hold in connection with the Obligations or the
Loan Documents, or both, and it shall not be necessary for the Lender to
marshal assets in favor of any Borrower or any other Person, or to proceed upon
or against or exhaust any security or remedy before proceeding to enforce this
Agreement. Each Borrower and Guarantor expressly waives any right to require
the Lender to marshal assets in favor of any Borrower, any Guarantor or any
other Person, or to proceed against any Guarantor, any other Borrower or any
collateral provided by any Person, and agrees that the Lender may proceed
against any Guarantor, one or more Borrowers or any Collateral in such order as
it shall determine in its sole and absolute discretion.

(f) If any Borrower makes a payment in respect of the Obligations, it
shall have the rights of contribution and reimbursement set forth below
against the other Borrowers, and shall be indemnified as set forth below;
provided that no Borrower shall enforce its rights to any payment by exercising
its rights of contribution, reimbursement or indemnification unless and until
all the Obligations shall have been paid in fall. Each Borrower waives any
right of subrogation, contribution, reimbursement, and other rights of
indemnity it may have against any Obligated Party.

(g) If any Borrower makes a payment in respect of the Obligations that
is greater than its Pro Rata Percentage (hereinafter defined) of the
Obligations, calculated as of the date such payment is made, the Borrower
making such payment shall have the right to receive from each of the other
Borrowers, and the other Borrowers jointly and severally agree to pay to such
Borrower, when permitted by paragraph (f) above, an amount such that the net
payments made by the Borrowers in respect of the Obligations shall be shared
among the Borrowers pro rata in proportion to their respective Pro Rata
Percentages of the Obligations. The Borrowers hereby jointly and severally
indemnify each of the other Borrowers and jointly and severally agree to hold
each of them harmless from and against any and all amounts which any such
Borrower shall ever be required to pay in respect of the Obligations in excess
of such Borrower's respective Pro Rata Percentage of the Obligations.
Notwithstanding anything to the contrary contained in this paragraph or in this
Agreement, no liability or obligation of any Borrower that shall accrue
pursuant to this Agreement shall be paid nor shall it be deemed owed pursuant
to this Agreement or any Loan Documents unless and until all of the Obligations
shall be paid in full. As used herein, the term "PRO RATA PERCENTAGE" shall
mean, for each Borrower, the percentage derived by dividing (a) the amount by
which the fair saleable value of its assets on December 30, 1998, exceeds its
liabilities (such excess for each Borrower, its "Net Worth"), by (b) the Net
Worth of all of the Borrowers.

(h) The Lender may file a separate action or actions against any
Borrower, whether such action is brought or prosecuted with respect to any
security or against any other Person, or whether any other Person is joined in
any such action or actions. Each Borrower agrees that the Lender and any
Responsible Officer of any Borrower may deal with each other in connection with
the Obligations or otherwise, or alter any contracts or agreements now or
hereafter existing between any of them, in any manner whatsoever, all without
in any way altering or affecting the continuing efficacy of this Agreement.

(i) The Lender's rights hereunder shall be reinstated and revived, and
the enforceability of this Agreement shall continue, with respect to any amount
at any time paid on account of the Obligations that thereafter shall be
required to be restored or returned by the Lender, all as though such amount
had not been paid. The rights of the Lender created or granted herein and the
enforceability of this Agreement at all times shall remain effective to cover
the full amount of all the Obligations even though the Obligations, including
any part thereof or any other security or guaranty therefor, may be or
hereafter may become invalid or otherwise unenforceable as against any
Obligated Party or any Borrower and whether or not any Obligated Party or any
other Borrower shall have any personal liability with respect thereto.

(j) To the maximum extent permitted by applicable law, each Borrower
expressly waives any and all defenses now or hereafter arising or asserted by
reason of (i) any disability or other defense of any other Borrower with
respect to the Obligations, (ii) the unenforceability or invalidity of any
security or guaranty for the Obligations or the lack of perfection or
continuing perfection or failure of priority of any security for the
Obligations, (iii) the cessation for any cause whatsoever of the liability of
any other Borrower (other than by reason of the full payment and performance of
all Obligations), (iv) any failure of the Lender to marshal assets in favor of
any Borrower or any other Person, (v) any failure of the Lender to give notice
of sale or other disposition of Collateral to any Borrower or any other Person,
or any defect in any notice that may be given in connection with any

sale or disposition of Collateral, (vi) any failure of the Lender to comply with
applicable law in connection with the sale or other disposition of any
Collateral or other security for any Obligation, including any failure of the
Lender to conduct a commercially reasonable sale or other disposition of any
Collateral or other security for any Obligation, (vii) any act or omission of
the Lender or others that directly or indirectly results in or aids the
discharge or release of any Borrower, any other Obligated Party, or the
Obligations or any security or guaranty therefor by operation of law or
otherwise, (viii) any law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects more burdensome
than that of the principal or which reduces a surety's or guarantor's obligation
in proportion to the principal obligation, (ix) any failure of the Lender to
file or enforce a claim in any bankruptcy or other proceeding with respect to
any Person, (x) the election by the Lender of the application or non-application
of Section 1 111(b)(2) of the Federal Bankruptcy Code, (xi) any extension of
credit or the grant of any lien under Section 364 of the Federal Bankruptcy
Code, (xii) any use of cash collateral under Section 363 of the Federal
Bankruptcy Code, (xiii) any agreement or stipulation with respect to the
provision of adequate protection in any bankruptcy proceeding of any Person,
(xiv) the avoidance of any lien in favor of the Lender for any reason, or (xv)
any action taken by the Lender that is authorized by this Agreement or any Loan
Document. Until such time, if any, as all of the Obligations have been paid and
performed in full and no portion of any commitment of the Lender to any Borrower
under any Loan Document remains in effect, no Borrower shall have any right of
subrogation, contribution, reimbursement or indemnity, and each Borrower
expressly waives any right to enforce any remedy that the Lender may now have or
hereafter may have against any other Person, and waives the benefit of, or any
right to participate in, any Collateral now or hereafter held by the Lender.
Each Borrower expressly waives all presentments, demands for payment or
performance, notices of nonpayment, notices of intent to accelerate, notices of
acceleration and notices of nonperformance, protests, notices of protest,
notices of dishonor and all other notices or demands of any kind or nature
whatsoever with respect to the Obligations, and all notices of acceptance of
this Agreement or of the existence, creation or incurring of new or additional
Obligations.

(k) To the fullest extent permitted by applicable law, each Borrower
expressly waives any suretyship defenses to the enforcement of this Agreement
or any rights of the Lender created or granted hereby or to the recovery by any
such Person including any Guarantor, against any Borrower, or any other Person
liable therefor of any deficiency after a judicial or nonjudicial foreclosure
or sale, even though such a foreclosure or sale may impair the subrogation
rights of Borrowers and may preclude Borrowers from obtaining reimbursement or
contribution from the other Borrowers. Each Borrower expressly waives any
defenses or benefits that may be derived pursuant to or from Rule 31 of the
Texas Rules of Civil Procedure, Section 17.001 of the Civil Practice and
Remedies Code and Chapter 34 of the Texas Business and Commerce Code, as
amended, or comparable provisions of the laws of any other jurisdiction, and
all other suretyship defenses it otherwise might or would have under Texas law
or other applicable law.

(l) Each Borrower warrants and agrees that each of the waivers and
consents set forth in this Section 2.19 are made after consultation with legal
counsel and with full knowledge of their significance and consequences, with
the understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which such Borrower
otherwise may have against the other Borrowers, the Lender or others, or
against Collateral, and that, under

the circumstances, the waivers and consents herein given are reasonable and not
contrary to public policy or law. If any of the waivers or consents herein are
determined to be contrary to any applicable law or public policy, such waivers
and consents shall be effective to the maximum extent permitted by law.

(m) Each Borrower represents and warrants to the Lender that (i) such
Borrower has established adequate means of obtaining from the other Borrowers
on a continuing basis financial and other information pertaining to the
business, operations, and condition (financial and otherwise) of the other
Borrowers, and their property, and (ii) such Borrower now is and hereafter will
be familiar with the business, operations and condition (financial and
otherwise) of the other Borrowers, and their property. Each Borrower hereby
waives and relinquishes any duty on the part of the Lender to disclose to such
Borrower any matter, fact or thing relating to the business, operations or
condition (financial or otherwise) of the other Borrowers, or the property of
the other Borrowers, whether now or hereafter known by the Lender during the
term of this Agreement.

ARTICLE III

PAYMENTS

SECTION 3.1 METHOD OF PAYMENT. All payments of principal, interest,
and other amounts to be made by the Borrowers under this Agreement and the
other Loan Documents shall be made to the Lender at 910 Travis, Houston, Texas,
77002, in Dollars and in immediately available funds, without setoff,
deduction, or counterclaim, not later than 11:00 A.M. on the date on which such
payment shall become due (each such payment made after such time on such due
date to be deemed to have been made on the next succeeding Business Day). The
Borrowers shall, at the time of making each such payment, specify to the Lender
the sums payable by the Borrowers under this Agreement and the other Loan
Documents to which such payment is to be applied (and in the event that the
Borrowers fail to so specify, or if a Default has occurred and is continuing,
the Lender, may apply such payment to the Obligations in such order and manner
as it may elect in its sole discretion). Whenever any payment under this
Agreement or any other Loan Document shall be stated to be due on a day that is
not a Business Day, such payment may be made on the next succeeding Business
Day, and such extension of time shall in such case be included in the
computation of the payment of interest and letter of credit and facility fees,
as the case may be. Unless otherwise agreed to, in writing, or otherwise
required by applicable law, payments will be applied first to accrued, unpaid
interest, then to principal, and any remaining amount to any unpaid collection
costs, late charges and other charges and fees, provided, however, upon
delinquency or other default, Lender reserves the right to apply payments among
principal, interest, late charges, collection costs and other charges and fees
at its discretion.

SECTION 3.2 PREPAYMENT. (a) The Borrowers may, upon at least one
Business Days' prior notice to the Lender in the case of Base Rate Advances,
and at least three (3 ) Business Days' prior notice to the Lender in the case
of LIBOR Advances, prepay the Advances in whole at any time or from time to
time in part without premium or penalty but with accrued interest to the date
of prepayment on the amount so prepaid, provided that (i) LIBOR Advances may be
prepaid only on the last day of the Interest Period for such Advances and in
the event that Borrower makes a

prepayment other than on the last day of an Interest Period, Borrowers shall
pay all accrued interest on the principal amount prepaid with such prepayment
and, on demand, shall reimburse Lender and hold Lender harmless from all losses
and expenses incurred by Lender as a result of such prepayment, including,
without limitation, any losses and expenses arising from the liquidation or
reemployment of deposits acquired to fund or maintain the principal amount
prepaid. Such reimbursement shall be calculated as though Lender funded the
principal amount prepaid through the purchase of U.S. Dollar deposits in the
London, England interbank market having a maturity corresponding to such
Interest Period and bearing an interest rate equal to the LIBOR Rate for such
Interest Period, whether in fact that is the case or not. Lender's
determination of the amount of such reimbursement shall constitute prima facie
evidence that such determination is accurate and correct; and (ii) each partial
prepayment shall be in the principal amount of $1,000,000 or an integral
multiple thereof. All notices under this Section shall be irrevocable and shall
be given not later than 11:00 A.M. on the day which is not less than the number
of Business Days specified above for such notice.

(b) If on any date the Letter of Credit Liabilities exceed the Letter
of Credit Commitment, the Borrowers shall Cash Collateralize on such date the
outstanding Letters of Credit in an amount equal to the excess of the maximum
amount then available to be drawn under the Letters of Credit over the
aggregate Letter of Credit Commitment. If on any date after giving effect to
any Cash Collateral pledged on such date pursuant to the preceding sentence,
(i) the aggregate amount of Advances then outstanding, plus the amount of
Letter of Credit Liabilities exceeds (ii) the Commitment, the Borrowers shall
immediately (and in any event within three (3) days) upon notice or demand,
prepay the outstanding principal amount of Advances by an amount equal to the
applicable excess.

(c) If at any time any of the Borrowers or any Subsidiary sells or
otherwise disposes of any of its Specific Fixed Collateral securing the
Obligations, the Borrower or Subsidiary involved shall immediately (and in any
event within three (3) Business Days) notify the Lender in writing of said
event (and that the notice is pursuant to Section 3.2(c)) and pursuant to this
Section 3.2(c) the Lender shall have thirty (30) days to direct the Borrowers
(at Lender's election) that: (i) 100% of the net proceeds received shall be
applied as a mandatory prepayment on the Note immediately (and in any event
within three (3) Business Days) after receipt of notice of the Lender's
direction; (ii) the Lender has reduced the Commitment by the amount of said net
proceeds; or (iii) the Lender has decided that no mandatory prepayment or
Commitment reduction is required as a result thereof. Nothing in this Section
3.2(c) shall be construed as approval for any disposition of Collateral which
is expressly prohibited by Section 9.8.

SECTION 3.3 TAXES.

(a) All payments by the Borrowers of principal of and interest on the
Advances and of all fees and other amounts payable under any Loan Document are
payable without deduction for or on account of any present or future taxes,
levies, imposts, deductions, charges, fees, duties or withholdings, and all
liabilities with respect thereto, excluding in the case of the Lender the
following: (i) taxes imposed on such person's income, and franchise taxes
imposed on it, by the jurisdiction order which such person is organized or any
political subdivision thereof and, in the case

of the Lender, taxes imposed on its income, and franchise taxes imposed on it,
by the jurisdiction of the Lender's Applicable Lending Office or any political
subdivision thereof; (ii) income taxes imposed by the United States of America;
and (iii) any taxes imposed by the United States of America by means of
withholding at the source if and to the extent that such taxes shall be in
effect and shall be applicable, on the date hereof, to payments to be made to
the Lender (all such non-excluded taxes, levies, imposes, deductions, changes,
fees, duties, withholdings and liabilities being hereinafter referred to as
"Taxes"). Except for excluded taxes enumerated above, if any Borrower is
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under the Note to the Lender, the Borrowers shall pay additional
interest or shall make additional payments in such amounts so that every net
payment of principal of and interest on the affected Advances and of all other
amounts payable by it under any Loan Document, after withholding or deduction
for or on account of any such Taxes will not be less than the amount provided
for herein or therein.

(b) Borrowers agree to pay any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or under the Notes or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or
the Notes (the "Other Taxes").

(c) The Borrowers, to the fullest extent permitted by law, will
indemnify the Lender for the full amount of Taxes or Other Taxes (including
any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under
this Section 3.3) paid by the Lender and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto except as a
result of the gross negligence or willful misconduct of the Lender, whether or
not such Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date the Lender makes
written demand therefor.

(d) Within 30 days after the date of any payment of Taxes by or at the
discretion of the Borrowers, the Borrowers will furnish to the Lender, at its
address referred to herein, the original or a certified copy of a receipt
evidencing payment thereof. Should the Lender ever receive any refund, credit
or deduction from any taxing authority to which the Lender would not be
entitled but for the payment by the Borrowers of Taxes as required by this
Section 3.3 (it being understood that the decision as to whether or not to
claim, and if claimed, as to the amount of any such refund, credit or deduction
shall be made by the Lender in its sole discretion), the Lender thereupon shall
repay to the Borrowers an amount with respect to such refund, credit or
deduction equal to any net reduction in Taxes actually obtained by the Lender
and determined by the Lender to be attributable to such refund, credit or
deduction.

(e) The Lender shall use reasonable efforts (consistent with its
internal policies and legal and regulatory restrictions) to select a
jurisdiction for its Applicable Lending Office or change the jurisdiction of
its Applicable Lending Office, as the case may be, so as to avoid the
imposition of any Taxes or Other Taxes or to eliminate the amount of any such
additional amounts which may thereafter accrue; provided that no such selection
or change of the jurisdiction for its Applicable Lending Office shall be made
if, in the reasonable judgment of the Lender, such selection or change would be
disadvantageous to the Lender.

SECTION 3.4 COMPUTATION OF INTEREST. Interest on the LIBOR Advances
hereunder shall be computed by applying the ratio of the annual interest rate
over a year of 360 days, multiplied by the outstanding principal balance,
multiplied by the actual number of days the principal balance is outstanding
unless such calculation would result in a usurious rate, in which case interest
shall be calculated on the basis of a year of 365 or 366 days, as the case may
be. All other payments of interest hereunder shall be computed on the per annum
basis of a year of 365 or 366 days, as the case may be, and for the actual
number of days (including the first day but excluding the last day) elapsed.

ARTICLE IV

YIELD PROTECTION AND ILLEGALITY

SECTION 4.1 INCREASED COSTS. The Borrowers shall, jointly and
severally, pay to the Lender from time to time, within 15 days following demand
by the Lender such additional amounts as the Lender may determine to be
necessary to compensate it for any increased costs incurred by the Lender
determines are attributable to its making or maintaining of any LIBOR Advances
hereunder or its obligation to make any of such LIBOR Advances hereunder, or
any reduction in any amount receivable by the Lender hereunder in respect of
any such LIBOR Advances or such obligation other than increased costs described
in Section 2.5 or in Section 4.6 (such increases in costs and reductions in
amounts receivable being herein called "Increased Costs"), resulting from
either (i) the introduction of or any change in or in the interpretation of any
law or regulation by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof, or (ii) the
compliance with any guideline or request from any Governmental Authority,
central bank or comparable agency (whether or not having the force of law). The
Lender will furnish the Borrowers with a certificate, in reasonable detail,
setting forth the basis and the amount of such Increased Costs of the Lender.
The Borrowers shall reimburse the Lender for such increased cost in accordance
with this Section 4.1.

SECTION 4.2 LIMITATION ON TYPES OF ADVANCES. Anything herein to the
contrary notwithstanding, if with respect to any LIBOR Advances for any
Interest Period therefor:

(a) The Lender determines (which determination shall be conclusive)
that quotations of interest rates for the relevant deposits referred to in the
definition of "LIBOR Rate" in Section 1.1 are not being provided in the
relative amounts or for the relative maturities for purposes of determining the
rate of interest for such Advances as provided in this Agreement; or

(b) The Lender determines (which determination shall be conclusive)
that the relevant rates of interest referred to in the definition of "LIBOR
Rate" in Section 1.1 on the basis of which the rate of interest for such
Advances for such Interest Period is to be determined do not accurately reflect
the cost to the Lender of making or maintaining such Advances for such Interest
Period;

then the Lender shall give the Borrowers prompt notice thereof specifying the
relevant Type of Advances and the relevant amounts or periods, and so long as
such condition remains in effect, the Lender shall be under no obligation to
make additional Advances of such Type or to Convert

Advances of any other Type into Advances of such Type and the Borrowers shall,
on the last day(s) of the then current Interest Period(s) for the outstanding
Advances of the affected Type, either prepay such Advances or Convert such
Advances into another Type of Advance in accordance with the terms of this
Agreement.

SECTION 4.3. ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for the Lender or its
Eurodollar Lending Office to (a) honor its obligation to make LIBOR Advances
hereunder or (b) maintain LIBOR Advances hereunder, then the Lender shall
promptly notify the Borrowers thereof and the Lender's obligation to make or
maintain LIBOR Advances and to Convert other Types of Advances into LIBOR
Advances hereunder shall be suspended until such time as the Lender may again
make and maintain LIBOR Advances (in which case the provisions of Section 4.4
shall be applicable).

SECTION 4.4 TREATMENT OF AFFECTED ADVANCES. If the Advances of the
Lender of a particular Type (Advances of such Type being hereinafter called
"Affected Advances" and such Type being herein called the "Affected Type") are
to be Converted pursuant to Section 4.1 or 4.3, the Lender's Affected Advances
shall be automatically Converted into Base Rate Advances on the last day(s) of
the then current Interest Period(s) for the Affected Advances (or, in the case
of a Conversion required by Section 4.1(b) or 4.3, on such earlier date as
the Lender may specify to the Borrowers) and, unless and until the Lender gives
notice as provided below that the circumstances specified in Section 4.1 or 4.3
hereof which gave rise to such Conversion no longer exist:

(a) To the extent that the Lender's Affected Advances have been so
Converted, all payments and prepayments of principal which would otherwise be
applied to the Lender's Affected Advances shall be applied instead to its Base
Rate Advances; and

(b) All Advances which would otherwise be made or Continued by the
Lender as Advances of the Affected Type shall be made as or Converted into Base
Rate Advances and all Advances of the Lender which would otherwise be Converted
into Advances of the Affected Type shall be Converted instead into (or shall
remain as) Base Rate Advances.

SECTION 4.5 COMPENSATION. The Borrowers shall, jointly and severally,
pay to the Lender, upon the request of the Lender, such amount or amounts as
shall be sufficient (in the reasonable opinion of the Lender) to compensate it
for any loss, cost, or expense incurred by it as a result of:

(a) Any payment, prepayment or Conversion of a LIBOR Advance for any
reason (including, without limitation, the acceleration of the outstanding
Advances pursuant to Section 11.2) on a date other than the last day of an
Interest Period for such Advance; or

(b) Any failure by the Borrowers for any reason (including, without
limitation, the failure of any conditions precedent specified in Article VI to
be satisfied) to borrow, Convert, or prepay a LIBOR Advance on the date for
such borrowing, Conversion, or prepayment, specified in the relevant notice of
borrowing, prepayment, or Conversion under this Agreement.

Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which otherwise would have accrued on the principal amount so paid or Converted
or not borrowed for the period from the date of such payment, Conversion, or
failure to borrow to the last day of the Interest Period for such Advance (or,
in the case of a failure to borrow, the Interest Period for such Advance which
would have commenced on the date specified for such borrowing) at the
applicable rate of interest for such Advance provided for herein over (ii) the
interest component of the amount the Lender would have bid in the London
interbank market for Dollar deposits of leading banks and amounts comparable to
such principal amount and with maturities comparable to such period.

SECTION 4.6 CAPITAL ADEQUACY. If after the date hereof, the Lender
shall have determined that the adoption or implementation of any applicable
law, rule, or regulation regarding capital adequacy, or any change therein, or
any change in the interpretation or administration thereof by any central bank,
comparable agency, or other Governmental Authority charged with the
interpretation or administration thereof, or compliance by the Lender (or its
lending office or parent) with any guideline, request, or directive regarding
capital adequacy (whether or not having the force of law) of any central bank,
comparable agency, or other Governmental Authority (except to the extent such
request or directive arises as a result of the individual credit-worthiness of
the Lender), has the effect of increasing the amount of capital required or
expected to be maintained as a result of its Commitment hereunder, or has or
would have, the effect of reducing the rate of return on the Lender's (or its
parent's) capital as a consequence of its obligations hereunder or the
transactions contemplated hereby to a level below that which the Lender (or its
parent) could have achieved but for such adoption, implementation, change or
compliance (taking into consideration the Lender's policies with respect to
capital adequacy) by an amount deemed by the Lender to be material, then from
time to time, within 10 Business Days after demand by the Lender, the Borrowers
shall, jointly and severally, pay to the Lender such additional amount or
amounts as will compensate the Lender (or its parent) for such reduction. A
certificate of the Lender, in reasonable detail, claiming compensation under
this Section and setting forth the additional amount or amounts to be paid to
it hereunder shall be conclusive, absent manifest errors, although the failure
to give any such notice shall not diminish any of the Borrowers' obligations to
pay such additional amounts, and, the Borrowers shall, jointly and severally,
pay such additional amounts as provided herein. In determining such amount or
amounts, the Lender may use any reasonable averaging and attribution methods.

ARTICLE V

SECURITY

SECTION 5.1 COLLATERAL. To secure full and complete payment and
performance of the Obligations, the Borrowers shall execute and deliver or
cause to be executed and delivered the documents described below covering the
property and collateral described in this Section 5.1 (which, together with any
other property and collateral which may now or hereafter secure the Obligations
or any part thereof, is sometimes herein called the "Collateral"):

(a) HBH shall grant to the Lender a first priority mortgage on the
documented Vessels and all of such Vessels' engines, machinery, boats, tackle,
outfit, spare gear, fuel, consumable or other stores, belongings and
appurtenances, and whether now owned or hereafter acquired, and all insurance
policies and proceeds related thereto, pursuant to the Vessel Mortgages and the
Insurance Assignments, respectively.

(b) The Borrowers owning stock or other ownership interests in
Subsidiaries shall grant to the Lender and Heller a first priority pledge of
and security interest in all such stock and ownership interests in such
Subsidiaries (limited to a 65% interest with respect to Subsidiaries organized
in a foreign jurisdiction) and all products and proceeds thereof, pursuant to
the Security Agreement (Pledge).

(c) The Borrowers shall grant to the Lender a first priority security
interest in all of its now owned and hereafter acquired inventory, goods and
merchandise, wherever located in the United States, in each case which are held
for rent, lease or resale, including, without limitation, all raw materials,
finished goods, or parts inventory, or other inventory and work-in-process
which is sold or delivered to customers under construction contracts for
pipeline work, fabrication work, sale or rental/lease products manufactured by
any Borrower or otherwise sold/leased in the normal course of business, and all
documents of title or other documents representing them, and all proceeds and
products thereof (including, but not limited to, all proceeds of insurance with
respect thereto, including the proceeds of any casualty insurance), and any
lists, information and records prepared or kept in relation to the foregoing,
Accounts, accounts receivable (subject to the provisions of the Intercreditor
Agreement), Specific Fixed Collateral and all chattel paper, documents,
instruments, and general intangibles arising out of or pertaining to the
tangible and intangible collateral described in subsections (a) and (b) above
and this subsection (c), whether now owned or hereafter acquired, and all
products and proceeds thereof, pursuant to the Security Agreement.

(d) The Borrowers shall execute and cause to be executed such further
documents and instruments, including without limitation, Uniform Commercial Code
financing statements, as the Lender, in its reasonable discretion, deems
necessary or desirable to evidence and perfect its liens and security interests
in the Collateral.

SECTION 5.2 SETOFF. If an Event of Default shall have occurred and is
continuing, the Lender is hereby authorized at any time and from time to time,
without notice to the Borrowers (any such notice being hereby expressly waived
by the Borrowers), to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Lender to or for the credit or the
account of any of the Borrowers against any and all of the obligations of the
Borrowers now or hereafter existing under this Agreement, the Note, or any
other Loan Document, irrespective of whether or not the Lender or such Lender
shall have made any demand under this Agreement or the Note or such other Loan
Document and although such obligations may be unmatured. The Lender agrees
promptly to notify the Borrowers (with a copy to the Lender) after any such
setoff and application, provided that the failure to give such notice shall not
affect the validity of such setoff and application. The rights and remedies of
each Lender hereunder are in addition to other rights and remedies (including,
without limitation, other rights of setoff) which the Lender may have.

ARTICLE VI

CONDITIONS PRECEDENT

SECTION, 6.1 INITIAL ADVANCE. The obligation of the Lender to make its
initial Advance and to issue any initial Letter of Credit is subject to the
condition precedent that the Lender shall have completed its due diligence,
which due diligence shall have been satisfactory to Lender in Lender's
reasonable discretion and the Lender shall have received on or before the day
of such Advance all of the following, each dated (unless otherwise indicated)
the date hereof, in form and substance satisfactory to the Lender:

(a) Resolutions. Resolutions of the Board of Directors of the
Borrowers and the Guarantors certified by such Person's Secretary or an
Assistant Secretary which authorize the execution, delivery, and performance by
such Person of this Agreement and the other Loan Documents to which any
Borrower or Subsidiary is to be a party;

(b) Incumbency Certificate. A certificate of incumbency for each of the
Borrowers and the Guarantors certified by the Secretary or an Assistant
Secretary of such Person certifying the names of the officers of such Person
authorized to sign this Agreement and each of the other Loan Documents to which
the Borrower or Subsidiary is to be a party (including the certificates
contemplated herein) together with specimen signatures of such officers;

(c) Articles of Incorporation. The articles of incorporation (or other
applicable organizational documents) of each of the Borrowers and the
Guarantors certified by the Secretary of State of the state of incorporation
(or organization) of such Person and dated within 30 days prior to the date of
the initial advance;

(d) Bylaws. The bylaws (as applicable) of each of the Borrowers and
the Guarantors certified by the Secretary or an Assistant Secretary of such
Person;

(e) Governmental Certificates. Certificates of the appropriate
government officials of the state of incorporation (or organization) of each of
the Borrowers and the Guarantors as to the existence and good standing of such
Person, each dated within 30 days prior to the date of the initial Advance;

(f) Note. The Note executed by the Borrowers;

(g) Vessel Mortgages. A Vessel Mortgage executed by each Borrower
owning a Vessel;

(h) Security Agreement. The Security Agreement executed by the
Borrowers;

(i) Assignments of Insurances. Assignments of Insurances executed by
each Borrower owning a Vessel;

(j) Pledge Agreement. The Pledge Agreement executed by each Borrower
owning stock in a Subsidiary;

(k) Financing Statements. Uniform Commercial Code financing statements
executed by the Borrowers and covering the Collateral;

(l) Landlord and Mortgagee Waivers. Landlord and mortgagee waivers
executed by the landlords and mortgagees required by Lender;

(m) Intercreditor Agreement. The Intercreditor Agreement executed by
each Person which is to be a party thereto;

(n) Subordination Agreement. The Subordination Agreement executed by
each Person which is to be a party thereto;

(o) Assignment. The Assignment executed by the Subordinated Lender;

(p) Insurance Policies. Copies of all insurance policies required by
Section 8.5, together with loss payable endorsements in favor of the Lender with
respect to all insurance policies covering Collateral;

(q) UCC Searches. The results of Uniform Commercial Code searches
showing all financing statements and other documents or instruments on file
against the Borrowers in the offices of the Secretary of State of Texas,
Louisiana, California, Alabama, and Mississippi, such searches to be as of a
date no more than 30 days prior to the date of the initial Advance;

(r) Opinions of Counsels. Favorable opinions of Vinson & Elkins, Phelps
Dunbar L.L.C., and such other legal counsel to the Borrowers and the Guarantors
as required and approved by the Lender, as to all such matters as the Lender and
the Lender's counsel, Winstead Sechrest & Minick P.C., may reasonably request;

(s) Attorneys' Fees and Expenses. Evidence that the costs and
expenses (including attorneys' fees) referred to in Section 12.1, to the
extent incurred, shall have been paid in full by the Borrowers;

(t) Preferred Mortgages. The Lender shall have been furnished evidence
of proper perfection of the Vessel Mortgage on the Vessels and that such Vessel
Mortgage is a priority and subject only to such Liens as are acceptable to the
Lender in its sole discretion.

SECTION 6.2 ALL ADVANCES AND LETTERS OF CREDIT. Unless waived in
writing by the Lender, the obligation of the Lender to make any Advance
(including the initial Advance) and the Lender to issue, amend, or renew any
Letter of Credit (including any initial Letter of Credit) is subject to the
following additional conditions precedent:

(a) Advance Request Form/Letter of Credit Request Form. Unless waived
in writing by the Lender, the Lender shall have received, in connection with any
requested Advance in accordance with Section 2.6, an Advance Request Form, dated
the date of such Advance, executed by an authorized officer of the Borrowers,
and the Lender shall have received, in connection with any requested Letter of
Credit, a Letter of Credit Request Form, in accordance with Section 2.12,
executed by an authorized officer of the Borrowers;

(b) No Default. No Default shall have occurred and be continuing, or
would result from such Advance;

(c) Representations and Warranties. All of the representations and
warranties contained in Article VII hereof and in the other Loan Documents shall
be true and correct in all material respects on and as of the date of such
Advance with the same force and effect as if such representations and warranties
had been made on and as of such date;

(d) No Material Adverse Change. No Material Adverse Effect shall have
occurred since October 31, 1998.

(e) Guaranties. The Lender shall have received a guaranty executed by
each guarantor that is required to execute such guaranty, together with all Loan
Documents, all as contemplated and required by Section 8.13.

(f) Additional Documentation. The Lender shall have received such
additional approvals, opinions, or documents as the Lender or its legal counsel,
Winstead Sechrest & Minick P.C., may reasonably request.

ARTICLE VII

REPRESENTATIONS and WARRANTIES

To induce the Lender to enter into this Agreement, each Borrower
represents and warrants to the Lender that:

SECTION 7.1 CORPORATE EXISTENCE. Each Borrower and each Subsidiary (a)
is a corporation duly incorporated, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation or organization, as
applicable; (b) has all requisite corporate power and authority to own its
assets and carry on its business as now being or as proposed to be conducted;
and (c) is qualified to do business in all jurisdictions in which the nature of
its business makes such qualification necessary and where failure to be so
qualified would have a Material Adverse Effect. Each Borrower has the corporate
power and authority to execute, deliver, and perform its obligations under this
Agreement and the other Loan Documents to which it is or may become a party.

SECTION 7.2 FINANCIAL STATEMENTS. The Parent has delivered to the
Lender audited Consolidated financial statements of the Parent and its
Consolidated Subsidiaries as at and for the

fiscal year ended December 31,1997, and unaudited Consolidated financial
statements of Parent and its Consolidated Subsidiaries for the ten-month period
ended October 31, 1998 subject to normal year end adjustments with respect to
the unaudited interim statements and the absence of notes in the interim
statements. Such financial statements are true and correct in all material
respects, have been prepared in accordance with GAAP, and fairly present, on a
Consolidated basis, the financial condition of the Borrower and its
Subsidiaries as of the respective dates indicated therein and the results of
operations for the respective periods indicated therein. Neither Parent nor any
of its Subsidiaries has any material contingent liabilities, liabilities for
taxes, unusual forward or long-term commitments, or unrealized or anticipated
losses from any unfavorable commitments except as referred to or reflected in
such financial statements or otherwise disclosed in writing to Lender. As of
the date of this Agreement, there has been no material adverse change in the
business, condition (financial or otherwise), operations, or properties of
Borrowers and their Subsidiaries taken as a whole since the effective date of
the most recent financial statements referred to in this Section.

SECTION 7.3 CORPORATE ACTION: NO BREACH. The execution, delivery, and
performance by the Borrowers of this Agreement and the other Loan Documents to
which the Borrowers are or may become a party and compliance with the terms and
provisions hereof and thereof have been duly authorized by all requisite
corporate action on the part of the Borrowers and do not and will not (a)
violate or conflict with, or result in a breach of, or require any consent
under (i) the articles of incorporation or other organizational documents, as
applicable, or bylaws of the Borrowers or any of their Subsidiaries, (ii) any
applicable law, rule, or regulation or any order, writ, injunction, or decree
of any Governmental Authority or arbitrator, or (iii) any material agreement or
instrument to which the Borrowers or any of their Subsidiaries is a party or by
which any of them or any of their property is bound or subject, which in the
case of (ii) or (iii) could reasonably be expected to have a Material Adverse
Effect or (b) constitute a default under any such agreement or instrument, or
result in the creation or imposition of any Lien (except as provided in Article
V) upon any of assets of the Borrowers or any of their Subsidiaries.

SECTION 7.4 OPERATION OF BUSINESS. The Borrowers and each of their
Subsidiaries possess all licenses, permits, franchises, patents, copyrights,
trademarks, and trade names, or rights thereto, necessary to conduct their
respective businesses substantially as now conducted and as presently proposed
to be conducted, except where the failure to possess the same could not
reasonably be expected to have a Material Adverse Effect.

SECTION 7.5 LITIGATION AND JUDGMENTS. Except as disclosed on SCHEDULE
7.5, there is no action, suit, investigation, or proceeding before or by any
Governmental Authority or arbitrator pending, or to the knowledge of the
Borrowers, threatened against or affecting any Borrower or any Subsidiary, that
would, if adversely determined, have a Material Adverse Effect. There are no
outstanding judgments against any Borrower or any Subsidiary.

SECTION 7.6 RIGHTS IN PROPERTIES: LIENS. (a) The Borrowers and each
Subsidiary have good and indefeasible title to or valid leasehold interests in
their respective properties and assets, real and personal, including the
properties, assets, and leasehold interests reflected in the financial
statements described in Section 7.2, and none of the properties, assets, or
leasehold interests of any Borrower or any Subsidiary is subject to any Lien,
except as permitted by Section 9.2.

(b) All leases and agreements necessary for the conduct of the business
of the Borrowers and their Subsidiaries are valid and subsisting, in full force
and effect and there exists no default or event which with the giving of notice
or the passage of time or both would give rise to a default under any such lease
or leases, which could reasonably be expected to have a Material Adverse Effect.

(c) The rights, Collateral and other Property presently owned, leased
or licensed by the Borrowers and their Subsidiaries including, without
limitation, all easements and rights of way, include all rights, Collateral and
other Property necessary to permit the Borrowers and their Subsidiaries to
conduct their business in all material respects in the same manner as its
business has been conducted prior to the date hereof.

(d) Except as set forth on SCHEDULE 7.6(d) all of the Property and
Collateral of the Borrowers and their Subsidiaries which are reasonably
necessary for the operation of their businesses are in good working condition
reasonable wear and tear excepted and are maintained in accordance with prudent
business standards.

SECTION 7.7 ENFORCEABILITY. This Agreement constitutes, and the other
Loan Documents to which any Borrower is party, when delivered, shall constitute
the legal, valid, and binding obligations of such Borrower, enforceable against
such Borrower in accordance with their respective terms, except as limited by
bankruptcy, insolvency, or other laws of general application relating to the
enforcement of creditors' rights.

SECTION 7.8 APPROVALS. No authorization, approval, or consent of, and
no filing or registration with, any Governmental Authority or third party is
or will be necessary for the execution, delivery, or performance by any of the
Borrowers of this Agreement and the other Loan Documents to which any of the
Borrowers is or may become a party or for the validity or enforceability
thereof.

SECTION 7.9 DEBT. The Borrowers and their Subsidiaries have no Debt,
except as disclosed on SCHEDULE 7.9.

SECTION 7.10 Taxes. The Borrowers and each Subsidiary have filed all
tax returns (Federal, state, and local) required to be filed, including all
income, franchise, employment, property, and sales tax returns, and have paid
all of their respective liabilities for taxes, assessments, governmental
charges, and other levies that are due and payable. Except as set forth in
SCHEDULE 7.10, the Borrowers know of no pending investigation of any Borrower or
any Subsidiary by any taxing authority or of any pending but unassessed tax
liability of any Borrower or any Subsidiary the assessment of which could
reasonably be expected to have a Material Adverse Effect.

SECTION 7.11 USE OF PROCEEDS; MARGIN SECURITIES. The proceeds of the
Note shall be used for general corporate working capital and to support the
issuance of Letters of Credit issued in the ordinary course of business. Neither
any Borrower nor any Subsidiary is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations G, T, U,
or X of the Board of Governors of the Federal Reserve System), and no part of
the proceeds of any Advance will be used to purchase

or carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying margin stock. The Borrowers jointly and severally
represent and warrant that no portion of any Advance or loan made hereunder
shall be used directly or indirectly to purchase ineligible securities, as
defined by applicable regulations of the Federal Reserve Board, underwritten by
any affiliate of Bank One Corporation during the underwriting period and for 30
days thereafter.

SECTION 7.12 ERISA. Each Borrower and each domestic Subsidiary is in
compliance in all material respects with all applicable provisions of ERISA. No
Termination Event has occurred or, to the knowledge of Parent, is reasonably
expected to occur with respect to any Plan. Neither any Borrower nor any ERISA
Affiliate has received any notification (or has knowledge of any reason to
expect) that any Multi-employer Plan is in reorganization or has been
terminated, within the meaning of Title IV of ERISA.

SECTION 7.13 DISCLOSURE. No statement, information, report,
representation, or warranty made by any Borrower in this Agreement or in any
other Loan Document or furnished to the Lender in connection with this Agreement
or any transaction contemplated hereby contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading.

SECTION 7.14 SUBSIDIARIES. The Borrowers have no Subsidiaries other
than those listed on SCHEDULE 7.14, and SCHEDULE 7.14 sets forth the
jurisdiction of incorporation of each Subsidiary and the percentage of each
Borrower's ownership of the outstanding voting stock of each Subsidiary. All of
the outstanding capital stock of each Subsidiary has been validly issued, is
fully paid, and is nonassessable.

SECTION 7.15 AGREEMENTS. Neither any Borrower nor any Subsidiary is in
default in any respect in the performance, observance, or fulfillment of any of
the obligations, covenants, or conditions contained in this Agreement or any
agreement or instrument material to its business to which it is a party.

SECTION 7.16 COMPLIANCE WITH LAWS. Neither any Borrower nor any
Subsidiary is in violation in any material respect of any law, rule,
regulation, order, or decree of any Governmental Authority or arbitrator.

SECTION 7.17 INVENTORY. All inventory of each Borrower has been and
will hereafter be produced in compliance with all applicable laws, rules,
regulations, and governmental standards, including, without limitation, the
minimum wage and overtime provisions of the Fair Labor Standards Act, as amended
(29 U.S.C. Sections 201-219), and the regulations promulgated thereunder.

SECTION 7.18 INVESTMENT COMPANY ACT. Neither any Borrower nor any
Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.

SECTION 7.19 PUBLIC UTILITY HOLDING COMPANY ACT. Neither any Borrower
nor any Subsidiary is a "holding company" or a "subsidiary company" of a
"holding company" or an

"affiliate" of a "holding company" or a "public utility" within the meaning of
the Public Utility Holding Company Act of 1935, as amended.

SECTION 7.20 ENVIRONMENTAL MATTERS. Except as disclosed on SCHEDULE
7.20:

(a) Each Borrower, each Subsidiary, and all of their respective
properties, assets, and operations are in full compliance with all
Environmental Laws applicable to such Person, except where the failure to be in
compliance would not reasonably be expected to have a Material Adverse Effect.
No Borrower is aware of, nor has any Borrower received notice of, any past,
present, or future conditions, events, activities, practices, or incidents
which would interfere with or prevent the compliance or continued compliance of
the Borrower and the Subsidiaries with all Environmental Laws applicable to
such Person, except where the failure to be in compliance would not reasonably
be expected to have a Material Adverse Effect;

(b) Each Borrower and each Subsidiary have obtained all permits,
licenses, and authorizations that are required under applicable Environmental
Laws, and all such permits are in good standing and each Borrower and its
Subsidiaries are in compliance with all of the terms and conditions of such
permits, except where the failure to obtain or be in compliance could not
reasonably be expected to have a Material Adverse Effect;

(c) No Hazardous Materials exist on, or within or have been used,
generated, stored, transported, disposed of on, or Released from any of the
properties or assets of any Borrower or any Subsidiary, except in compliance
with all Environmental Laws applicable to such Person. The use which the
Borrowers and their Subsidiaries make and intend to make of their respective
properties and assets will not result in the use, generation, storage,
transportation, accumulation, disposal, or Release of any Hazardous Material
on, in, or from any of their properties or assets in violation of any
Environmental Law applicable to such Person;

(d) Neither any Borrower nor any of their Subsidiaries nor any of
their respective currently or previously owned or leased properties or
operations is subject to any outstanding or, to the best of its knowledge,
threatened order from or agreement with any applicable Governmental Authority
or other Person or subject to any judicial or docketed administrative
proceeding with respect to (i) failure to comply with applicable Environmental
Laws, (ii) Remedial Action, or (iii) any Environmental Liabilities arising from
a Release or threatened Release;

(e) There are no conditions or circumstances associated with the
currently or previously owned or leased properties or operations of the
Borrowers or any of their Subsidiaries that could reasonably be expected to
give rise to any Environmental Liabilities that in the aggregate could
reasonably be expected to have a Material Adverse Effect;

(f) Neither any Borrower nor any of its Subsidiaries is a treatment,
storage, or disposal facility requiring a permit under the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., regulations
thereunder or any comparable provision of state law. The Borrowers and their
Subsidiaries are in compliance with all applicable financial responsibility
requirements of all

applicable Environmental Laws, except where the failure to be in compliance
could reasonably be expected to have a Material Adverse Effect;

(g) Neither any Borrower nor any of its Subsidiaries has filed or
failed to file any notice required under applicable Environmental Law reporting
a Release; and

(h) No Lien arising under any Environmental Law has attached to any
property or revenues of any Borrower or its Subsidiaries.

SECTION 7.21 YEAR 2000 COMPLIANCE. As of the date of any request for
an Advance or issuance of a Letter of Credit under this Agreement, as of the
date of any renewal, extension, amendment, rearrangement, increase, and/or
modification of this Agreement, and at all times this Agreement or the Lender's
commitment to make Advances or issue Letters of Credit under this Agreement is
outstanding:

(a) To Parent's knowledge after due inquiry, all devices, systems,
machinery, information technology, computer software and hardware, and other
date sensitive technology jointly and severally the "Systems") used by
Borrowers to carry on their businesses as presently conducted and as
contemplated to be conducted in the future are Year 2000 Compliant or will
be Year 2000 Compliant within a period of time calculated to result in no
material disruption of any of Borrowers' business operations. For purposes
of these provisions, "Year 2000 Compliant" means that such Systems are
designed to be used prior to, during and after the Gregorian calendar year
2000 A.D. and will operate during each such time period without error
relating to date data, specifically including any error relating to, or the
product of, date data which represents or references different centuries or
more than one century.

(b) Borrowers have: (1) undertaken a detailed inventory, review, and
assessment of all areas within their businesses and operations that could be
adversely affected by the failure of Borrowers to be Year 2000 Compliant on
a timely basis; (2) developed a detailed plan and time line for becoming
Year 2000 Compliant on a timely basis, and (3) to date, implemented that
plan in accordance with that timetable in all material respects.

(c) Borrowers have made written inquiry of each of its key suppliers,
vendors, and customers, and is undertaking to obtain in writing
confirmations from all such persons as to whether such persons have
initiated programs to become Year 2000 Compliant and on the basis of such
confirmations, Borrowers reasonably believe that all such persons will be or
become so compliant. For purposes hereof, "key suppliers, vendors, and
customers" refers to those suppliers, vendors, and customers of Borrowers
whose business failure would, with reasonable probability, result in a
material adverse change in the business, properties, condition (financial or
otherwise), or prospects of any of the Borrowers. For purposes of this
paragraph, Lender confirms to Borrowers that Lender has initiated its own
corporate-wide Year 2000 program with respect to its lending activities.

(d) The fair market value of all real and personal property pledged to
the Lender as Collateral to secure the Advances hereunder is not and shall
not be less than currently anticipated or subject to substantial
deterioration in value because of the failure of such Collateral to be Year
2000 Compliant.

SECTION 7.22 INSURANCE. Schedule 7.22 contains an accurate and
complete description of all material policies of fire, liability, workmen's
compensation and other forms of insurance owned or held by the Borrowers and
each Subsidiary. All such policies are in full force and effect, all premiums
with respect thereto covering all periods up to and including the date of the
closing have been paid, and no notice of cancellation or termination has been
received with respect to any such policy. Such policies are sufficient for
compliance with all requirements of law and of all agreements to which the
Borrowers or any Subsidiary is a party; are valid, outstanding and enforceable
policies; provide adequate insurance coverage in at least such amounts and
against at least such risks (but including in any event public liability) as
are usually insured against in the same general area by companies engaged in
the same or a similar business for the assets and operations of the Borrowers
and each Subsidiary; will remain in full force and effect through the
respective dates set forth in SCHEDULE 7.22 without the payment of additional
premiums; and will not in any way be affected by, or terminate or lapse by
reason of, the transactions contemplated by this Agreement. None of the
Borrowers nor any Subsidiary has been refused any insurance with respect to its
Property or operations, nor has its coverage been limited below usual and
customary policy limits, by an insurance carrier to which it has applied for
any such insurance or with which it has carried insurance during the last three
years.

SECTION 7.23 HEDGING AGREEMENTS. SCHEDULE 7.23 sets forth, as of the
date hereof, a true and complete list of all Hedging Agreements, Financing
Transactions and Swap Transactions (including commodity price swap agreements,
forward agreements or contracts of sale which provide for prepayment for
deferred shipment or delivery of oil, gas or other commodities) of the
Borrowers and each Subsidiary, the material terms thereof (including the type,
term, effective date, termination date and notional amounts or volumes), the
net mark to market value thereof, all credit support agreements relating
thereto (including any margin required or supplied), and the counterparty to
each such agreement.

SECTION 7.24 RESTRICTION ON LIENS. Except as set forth on SCHEDULE
9.2, in the Subordinated Loan Documents, and in the Heller Loan Documents, none
of the Borrowers nor any of the Subsidiaries is a party to any agreement or
arrangement (other than this Agreement and the other Loan Documents), or
subject to any order, judgment, writ or decree, which either restricts or
purports to restrict its ability to grant Liens to other Persons on or in
respect of their respective Property or Collateral.

SECTION 7.25 MATERIAL DEBT AGREEMENTS. Set forth on SCHEDULE 7.25
hereto is a complete and correct list of all material agreements, leases,
indentures, purchase agreements, obligations in respect of letters of credit,
guarantees, joint venture agreements, and other instruments in effect or to be
in effect following the date hereof (other than Hedging Agreements) providing
for, evidencing, or otherwise relating to any Debt of any of the Borrowers or
any of the Subsidiaries, and all obligations of any of the Borrowers or any of
the Subsidiaries to issuers of surety or appeal bonds

issued for account of any of the Borrowers or any such Subsidiary, and such
list correctly sets forth the names of the debtor or lessee and creditor or
lessor with respect to the Debt or lease obligations outstanding or to be
outstanding and the property subject to any Lien securing such Debt or lease
obligation.

ARTICLE VIII

POSITIVE COVENANTS

Each Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or Lender has any Commitment hereunder, the
Borrowers will perform and observe the following positive covenants:

SECTION 8.1 REPORTING REQUIREMENTS. The Borrowers will furnish to the
Lender:

(a) Annual Financial Statements. As soon as available and in any event
within 90 days after the end of each fiscal year of the Parent, the audited
consolidated and unaudited consolidating statements of income, stockholders'
equity, changes in financial position and cash flow of the Parent and its
Consolidated Subsidiaries for such fiscal year, and the related audited
consolidated and unaudited consolidating balance sheets of the Parent and its
Consolidated Subsidiaries as at the end of such fiscal year, and setting forth
in each case in comparative form the corresponding figures for the preceding
fiscal year, and accompanied by the related unqualified opinion of independent
public accountants of recognized national standing acceptable to the Lender
which opinion shall state that said financial statements fairly present the
consolidated and consolidating financial condition and results of operations of
the Parent and its Consolidated Subsidiaries as at the end of, and for, such
fiscal year and that such financial statements have been prepared in accordance
with GAAP except for such changes in such principles with which the independent
public accountants shall have concurred and such opinion shall not contain a
"going concern" or like qualification or exception; and, in addition thereto,
as soon as available in any event within sixty (60) after the end of each
fiscal year of the Parent, pro forma projections in form and substance
satisfactory to the Lender for the ensuing five (5) year period on a
year-by-year basis, including, without limitation, the consolidated and
consolidating statements of income and cash flow of the Parent and its
Consolidated Subsidiaries for such periods, and the related consolidated and
consolidating balance sheets of the Parent and its Consolidated Subsidiaries
for such period, and the estimated capital expenditures for such periods.

(b) Quarterly Financial Statements. As soon as available and in any
event within 45 days after the end of each of the first three fiscal quarterly
periods of each fiscal year of the Parent, consolidated and consolidating
statements of income, stockholders' equity, changes in financial position and
cash flow of the Parent and its Consolidated Subsidiaries for such period and
for the period from the beginning of the respective fiscal year to the end of
such period, and the related consolidated and consolidating balance sheets as
at the end of such period, and setting forth in each case in comparative form
the corresponding figures for the corresponding period in the preceding fiscal
year, accompanied by the certificate of a Responsible Officer, which
certificate shall state that said financial statements fairly present the
consolidated and consolidating financial condition and

results of operations of the Parent and its Consolidated Subsidiaries in
accordance with GAAP, as at the end of, and for, such period (subject to normal
year-end audit adjustments);

(c) Certificate of Compliance and No Default. Concurrently with the
delivery of each of the financial statements referred to in Sections 8.1(a)
and 8.1(b), a certificate of a Responsible Officer (i) stating that a review
of the activities of the Borrowers has been made under his supervision with a
view to determining whether the Borrowers have fulfilled all of their
obligations under this Agreement, the other Loan Documents, and the Note; (ii)
stating that the Borrowers have fulfilled their obligations under such
instruments and that all representations and warranties made herein continue to
be true and correct in all material respects (or specifying the nature of any
change); (iii) to the extent requested from time-to-time by the Lender,
specifically affirming compliance of the Borrowers with any of their
representations or obligations under such instruments; (iv) containing or
accompanied by such financial or other details, information and material as the
Lender may reasonably request to evidence such compliance; (v) stating that to
the best of such officer's knowledge, no Default has occurred and is
continuing, or if a Default has occurred and is continuing, a statement as to
the nature thereof and the action that is proposed to be taken with
respect thereto, and (vi) showing in reasonable detail the calculations
demonstrating compliance with Article X;

(d) Management Letters. Promptly upon receipt thereof, a copy of any
management letter or written report submitted to any Borrower or any Subsidiary
by independent certified public accountants;

(e) Notice of Litigation. Promptly after the commencement thereof,
notice of all actions, suits, and proceedings before any Governmental Authority
or arbitrator affecting any Borrower or any Subsidiary which, if determined
adversely to any Borrower or such Subsidiary, could have a Material Adverse
Effect;

(f) Notice of Default. As soon as possible and in any event within
five Business bays after the occurrence of each Default, a written notice
setting forth the details of such Default and the action that the Borrowers
have taken and propose to take with respect thereto;

(g) ERISA Reports. As soon as possible and in any event (i) within
five (5) Business Days after any Borrower or any ERISA Affiliate knows or has
reason to know that any Termination Event described in clause (i) of the
definition of Termination Event with respect to any Plan has occurred and
(B) within five (5) Business Days after any Borrower or any ERISA Affiliate
knows or has reason to know that any other Termination Event with respect to
any Plan, has occurred or is reasonably expected to occur, a statement of the
chief financial officer of the applicable Borrower describing such Termination
Event and the action, if any, which such Borrower or such ERISA Affiliate has
taken and proposes to take with respect thereto; (ii) promptly and in any event
within five (5) Business Days after receipt thereof by any Borrower or any
ERISA Affiliate, copies of each notice received by such Borrower or any ERISA
Affiliate from the PBGC stating its intention to terminate any Plan or to have
a trustee appointed to administer any Plan; and (iii) promptly and in any event
within five (5) Business Days after receipt thereof by any Borrower or any
ERISA

55
'

Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice
received by such Borrower or any ERISA Affiliate;

(h) Reports to Other Creditors. Promptly after the furnishing thereof,
copies of any material statement or report furnished to any other party pursuant
to the terms of any indenture, loan, or credit or similar agreement and not
otherwise required to be furnished to the Lender pursuant to any other clause of
this Section;

(i) Notice of Material Adverse Change. As soon as possible and in any
event within five days after the occurrence thereof, written notice of any
matter that could have a Material Adverse Effect;

(j) Proxy Statements, Etc. Promptly upon its becoming available, one
copy of each financial statement, report, notice, or final proxy statement sent
by any Borrower to stockholders generally and of each regular or periodic
report, registration statement or prospectus filed by any Borrower or any
Subsidiary with any securities exchange or the Securities and Exchange
Commission or any successor agency, and of any order issued by any Governmental
Authority in any proceeding to which any Borrower is a party. For purposes
of these provisions, "GOVERNMENTAL AUTHORITY" shall mean any government (or any
political subdivision or jurisdiction thereof), court, bureau, agency or other
governmental entity having or asserting jurisdiction over any Borrower or any
of its business, operations or properties;

(k) General Information. Promptly, such other information concerning
any Borrower or any Subsidiary as the Lender may from time to time reasonably
request;

(l) Borrowing Base Report. As soon as available, and in any event
within 30 days after the end of each calendar month, a Borrowing Base Report,
in substantially the form of EXHIBIT "B" hereto, certified by the Responsible
Officer of the Borrowers;

(m) Accounts Receivable Aging Reports. As soon as available, and in
any event within thirty (30) days after the end of each calendar month, an
accounts receivable aging report in form and detail satisfactory to the Lender
showing all accounts receivable of the Borrowers and the Subsidiaries divided
into domestic and international categories and aged in thirty-day intervals;
and

(n) Back Log Report. As soon as available, and in any event within
thirty (30) days after the end of each calendar month, a Back Log Report in
form and detail satisfactory to the Lender showing all items back logged of the
Borrowers and the Subsidiaries divided into domestic and international
categories.

(o) Jobs in Progress Report. As soon as available, and in any event
within thirty (30) days after the end of each calendar month, a Job in Progress
Report in form and detail satisfactory to the Lender showing all jobs in
progress of the Borrowers and the Subsidiaries divided into domestic and
international categories.

SECTION 8.2 MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS. The
Borrowers will preserve and maintain, and will cause each Subsidiary to
preserve and maintain, its corporate existence and all of its leases,
privileges, licenses, permits, franchises, qualifications, and rights that are
necessary or desirable in the ordinary conduct of its business. The Borrowers
will conduct, and will cause each Subsidiary to conduct, its business in an
orderly and efficient manner in accordance with good business practices.

SECTION 8.3 MAINTENANCE OF PROPERTIES. The Borrowers will maintain,
keep, and preserve, and cause each Subsidiary to maintain, keep, and preserve,
all of its properties (tangible and intangible) necessary or useful in the
proper conduct of its business in good working order and condition, reasonable
wear and tear excepted.

SECTION 8.4 TAXES AND CLAIMS. The Borrowers will pay or discharge, and
will cause each Subsidiary to pay or discharge, at or before maturity or before
becoming delinquent (a) all taxes, levies, assessments, and governmental
charges imposed on it or its income or profits or any of its property, and (b)
all lawful claims for labor, material, and supplies, which, if unpaid, might
become a Lien upon any of its property; provided, however, that neither any
Borrower nor any Subsidiary shall be required to pay or discharge any tax,
levy, assessment, or governmental charge which is being contested in good faith
by appropriate proceedings diligently pursued, and for which adequate reserves
have been established in accordance with GAAP.

SECTION 8.5 INSURANCE. Each Borrower will maintain, and will cause
each of the Subsidiaries to maintain, insurance with financially sound and
reputable insurance companies in such amounts and covering such risks as is
usually carried by corporations engaged in similar businesses and owning
similar properties in the same general areas in which the Borrowers and the
Subsidiaries operate, provided that in any event each Borrower will maintain
and cause each Subsidiary to maintain workmen's compensation insurance,
property insurance, comprehensive general liability insurance, products
liability insurance, and business interruption insurance reasonably
satisfactory to the Lender. Notwithstanding the foregoing, each Borrower shall
maintain insurance on all Collateral in amounts, containing terms, and issued
by insurance companies satisfactory to Lender. Each insurance policy covering
Specific Fixed Collateral, all Vessels, and all inventory owned by all and/or
any of the Borrowers shall name the Lender as loss payee and additional insured
and shall provide that such policy will not be canceled or reduced without 30
days' prior written notice to the Lender.

SECTION 8.6 INSPECTION RIGHTS. During normal business hours, from time
to time, the Borrowers will permit, and will cause each Subsidiary to permit,
representatives of the Lender to examine, copy, and make extracts from its
books and records, to visit and inspect its properties, and to discuss its
business, operations, and financial condition with its Responsible Officers and
independent certified public accountants.

SECTION 8.7 KEEPING BOOKS AND RECORDS. Each Borrower will maintain,
and will cause each Subsidiary to maintain, proper books of record and account
entries in conformity with GAAP.

SECTION 8.8 COMPLIANCE WITH LAWS. Each Borrower will comply, and will
cause each Subsidiary to comply, in all material respects with all applicable
laws, rules, regulations, orders, and decrees of any Governmental Authority or
arbitrator including, without limitation, all applicable Environmental Laws.

SECTION 8.9 COMPLIANCE WITH AGREEMENTS. Each Borrower will comply, and
will cause each Subsidiary to comply, in all material respects with all
agreements, contracts, and instruments binding on it or affecting its
properties or business.

SECTION 8.10 FURTHER ASSURANCES. Each Borrower will, and will cause
each Subsidiary to, execute and deliver such further agreements and instruments
and take such further action as may be reasonably requested by the Lender to
carry out the provisions and purposes of this Agreement and the other Loan
Documents and to create, preserve, and perfect the Liens of Lender in the
Collateral.

SECTION 8.11 ERISA. Each Borrower will comply, and will cause each
Subsidiary (other than Subsidiaries organized in jurisdictions outside of the
United States and its territories) to comply, with all minimum funding
requirements, and all other material requirements, of ERISA, if applicable, so
as not to give rise to any liability thereunder.

SECTION 8.12 YEAR 2000 COMPLIANT. Borrowers covenant and agree with
the Lender that, while any of the Obligations are outstanding or Lender has any
Commitment hereunder, Borrowers will:

(a) Furnish such additional information, statements and other reports
with respect to Borrowers' activities, course of action and progress towards
becoming Year 2000 Compliant as the Lender may request from time to time.

(b) In the event of any change in circumstances that causes or will
likely cause any of Borrowers' representations and warranties with respect to
its being or becoming Year 2000 Compliant to no longer be true (hereinafter,
referred to as a "Change in Circumstances") then Borrowers shall promptly, and
in any event within ten (10) days of receipt of information regarding a Change
in Circumstances, provide the Lender with written notice (the "Notice") that
describes in reasonable detail the Change in Circumstances and how such Change
in Circumstances caused or will likely cause Borrowers' representations and
warranties with respect to being or becoming Year 2000 Compliant to no longer
be true. Borrowers shall, within ten (10) days of a request, also provide the
Lender with any additional information the Lender requests of Borrowers in
connection with the Notice and/or a Change in Circumstances.

(c) Upon reasonable notice, give any representative of the Lender
access during all reasonable business hours to, and permit such representative
to examine, copy or make excerpts from, any and all books, records and
documents in the possession of Borrowers and relating to their affairs, and to
inspect any of the properties and Systems of Borrowers, and to project test the
Systems to determine if they are Year 2000 Compliant in an integrated
environment, all at the sole cost and expense of the Lender.

SECTION 8.13 SUBSIDIARY GUARANTIES AND PLEDGE OF ASSETS. Within
thirty (30) days after the acquisition or formation of any Subsidiary of any of
the Borrowers permitted under the terms of this Agreement, the Borrowers shall
cause such new Subsidiary to execute and deliver to Lender a Guaranty, and Loan
Documents pledging Bank One Accounts, Bank One Inventory and Bank One Stock (as
each such term is defined in the Intercreditor Agreement) to the Lender as may
be designated by Lender not inconsistent with the Intercreditor Agreement;
together with such resolutions, certificates and opinions regarding the
authorization and binding effect of such Guaranty and such Loan Documents as
the Lender may reasonably require.

SECTION 8.14 POST CLOSING MATTERS. The Borrowers will promptly, and in
any event within 90 days from the date hereof provide at the Borrowers'
expense, and in each case satisfactory to the Lender in its sole discretion:

(a) with respect to Specific Fixed Collateral and all inventory owned
by any and/or all of the Borrowers:

(i) landlord and mortgagee subordinations and waivers covering
all applicable real estate; and

(ii) vessel owner and vessel mortgagee subordinations and waivers
covering all applicable vessels;

(b) amendments and supplements to the Pledge Agreement referred to in
Section 6.1(j) and the Bailment Agreement of even date herewith executed in
connection with said Pledge Agreement together with all stock certificates of
all stock (except for stock of foreign Subsidiaries which shall only consist of
65% of each such foreign Subsidiary's stock) owned by each Borrower owning
stock in a Subsidiary, together with all stock certificates, stock powers, and
financing statements and financing statement amendments related thereto; and

ARTICLE IX

NEGATIVE COVENANTS

SECTION 9.1 DEBT. The Borrowers will not incur, create, assume, or
permit to exist, and will not permit any Subsidiary to incur, create, assume,
or permit to exist, any Debt, except:

(a) Debt to the Lender pursuant to the Loan Documents;

(b) Existing Debt described on SCHEDULE 7.9;

(c) Purchase money obligations incurred in the ordinary course of
business not to exceed an aggregate amount for all Borrowers and their
Subsidiaries of $5,000,000 in the aggregate at any time;

(d) The $35,000,000 Debt evidenced by the Heller Loan Documents;

(e) Swap Transactions (other than Financing Transactions) pursuant to
hedging Agreements with Lender or its affiliates; and

(f) Subordinated Debt in favor of the Subordinated Lender not to exceed
$20,000,000.

SECTION 9.2 LIMITATION ON LIENS. The Borrowers will not incur,
create, assume, or permit to exist, and will not permit any Subsidiary to
incur, create, assume, or permit to exist, any Lien upon any of its property,
assets, or revenues, whether now owned or hereafter acquired, except:

(a) Liens disclosed on SCHEDULE 9.2;

(b) Liens in favor of the Lender;

(c) Encumbrances consisting of minor easements, zoning restrictions, or
other restrictions on the use of real property that do not (individually or in
the aggregate) materially affect the value of the assets encumbered thereby or
materially impair the ability of any Borrower or the Subsidiaries to use such
assets in their respective businesses, and none of which is violated in any
material respect by existing or proposed structures or land use;

(d) Liens for taxes, assessments, or other governmental charges which
are not delinquent or which are being contested in good faith and for which
adequate reserves have been established;

(e) Liens of mechanics, materialmen, warehousemen, carriers, or other
similar statutory Liens securing obligations that are not yet due and are
incurred in the ordinary course of business;

(f) Liens resulting from good faith deposits to secure payments of
workmen's compensation or other social security programs or to secure the
performance of tenders, statutory obligations, surety and appeal bonds, bids,
contracts (other than for payment of Debt), or leases made in the ordinary
course of business; and

(g) Liens to secure purchase money indebtedness permitted under 9.1(c)
provided such Liens are placed within 30 days of the incurrence of such debt.

SECTION 9.3 MERGERS, ACQUISITIONS, ETC. None of Parent, any other
Borrower, nor any Subsidiary will merge into or with or consolidate with any
other Person, or sell, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of its Property or
assets to any other Person, or wind-up, dissolve, or liquidate itself; provided,
however. if (i) the Parent gives at least thirty (30) days' prior written notice
to the Lender and (ii) no Default or Event of Default has occurred or is
continuing or will result from the action proposed to be taken, and (iii) the
Lender's Lien on the Collateral would not be adversely affected, then any
Subsidiary of the Parent may merge or consolidate with the Parent or with any
other Subsidiary of the Parent or sell, lease, or otherwise dispose of (at fair
market value) all or any substantial part of its Property or assets to the
Parent or to any other Subsidiary of the Parent. The Borrowers will not, and
will not permit any Subsidiary to, purchase or otherwise acquire all or any part
of the business or assets of any Person or any shares or other evidence of
beneficial ownership of any Person except that the Parent will be permitted to
acquire entities in the same industry provided that (x) the Parent gives at
least thirty (30) days' prior written notice to the Lender, (y) no Default or
Event of Default has occurred or is continuing or will result from the action
proposed to be taken, and (z) the pro forma

effect of which will not cause a Default or an Event of Default. Notwithstanding
the foregoing, any or all cash or debt assumption acquisitions that aggregate
more than $5,000,000 from the date hereof will require the prior written consent
of the Lender.

SECTION 9.4 RESTRICTED PAYMENTS. The Parent will not declare or pay
any dividends or make any other payment or distribution (whether in cash,
property, or obligations) on account of its capital stock, or redeem, purchase,
retire, or otherwise acquire any of its capital stock, or return any capital to
its stockholders, or make any distribution of its assets to its stockholders,
or permit any of its Subsidiaries to purchase or otherwise acquire any capital
stock of any Borrower or another Subsidiary, or set apart any money for a
sinking or other analogous fund for any dividend or other distribution on its
capital stock or for any redemption, purchase, retirement, or other acquisition
of any of its capital stock, provided that, so long as no Default or Event of
Default has occurred and is continuing (or result therefrom) Parent may declare
and deliver dividends solely in the form of stock.

SECTION 9.5 INVESTMENTS. The Borrowers will not make, and will not
permit any Subsidiary to make, any advance, loan, extension of credit, or
capital contribution to or investment in, or purchase or own, or permit any
Subsidiary to purchase or own, any stock, bonds, notes, debentures, or other
securities of, any Person, except:

(a) readily marketable direct obligations of the United States of
America or any agency thereof with maturities of one year or less from the date
of acquisition;

(b) fully insured certificates of deposit with maturities of one year
or less from the date of acquisition issued by any commercial bank operating in
the United States of America having capital and surplus in excess of
$50,000,000;

(c) commercial paper of a domestic issuer if at the time of purchase
such paper is rated in one of the two highest rating categories of Standard
and Poor's Corporation or Moody's Investors Service, Inc.;

(d) acquisitions permitted under Section 9.3; and

(e) employee loans, advances, and expenses in the ordinary course of
business not to exceed $50,000 per person or $500,000 in the aggregate
outstanding at any time.

SECTION 9.6 LIMITATION ON ISSUANCE OF CAPITAL STOCK. The Borrowers
(other than Parent) will not, and will not permit any of their Subsidiaries to,
at any time issue, sell, assign, or otherwise dispose of (a) any of its capital
stock, (b) any securities exchangeable for or convertible into or carrying any
rights to acquire any of its capital stock, or (c) any option, warrant, or
other right to acquire any of its capital stock.

SECTION 9.7 TRANSACTIONS WITH AFFILIATES. No Borrower will enter into,
and no Borrower will permit any Subsidiary to enter into, any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate of any Borrower or

such Subsidiary, except in the ordinary course of and pursuant to the reasonable
requirements of such Borrower's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to such Borrower or such Subsidiary than
would be obtained in a comparable arm's-length transaction with a Person not an
Affiliate of any such Borrower or such Subsidiary.

SECTION 9.8 DISPOSITION OF ASSETS. The Borrowers will not sell, lease,
assign, transfer, or otherwise dispose of any of their Property, or permit any
Subsidiary to do so with any of its Property, except dispositions of inventory
in the ordinary course of business and dispositions of Property that does not
exceed $2,000,000 in the aggregate provided: (a) such dispositions do not cover
any Collateral in excess of $100,000 in gross proceeds in the aggregate in any
calendar year; and (b) such dispositions do not cover any of the Vessels.

SECTION 9.9 SALE AND LEASEBACK. The Borrowers will not enter into, and
will not permit any Subsidiary to enter into, any arrangement with any Person
pursuant to which it leases from such Person real or personal property that has
been or is to be sold or transferred, directly or indirectly, by it to such
Person.

SECTION 9.10 PREPAYMENT OF DEBT. The Borrowers will not prepay, and
will not permit any Subsidiary to prepay, any Debt, except the Obligations in
compliance with the provisions of Article III hereof.

SECTION 9.11 NATURE OF BUSINESS. The Borrowers will not, and will not
permit any Subsidiary to, engage in any business other than the businesses in
which they are engaged on the date hereof.

SECTION 9.12 ENVIRONMENTAL PROTECTION. The Borrowers will not, and
will not permit any of their Subsidiaries to, (a) use (or permit any tenant to
use) any of their respective properties or assets for the handling, processing,
storage, transportation, or disposal of any Hazardous Material, (b) generate
any Hazardous Material, (c) conduct any activity that is likely to cause a
Release or threatened Release of any Hazardous Material, or (d) otherwise
conduct any activity or use any of their respective properties or assets in any
manner that is likely to violate any applicable Environmental Law or create any
Environmental Liabilities for which any of the Borrowers or any of their
Subsidiaries would be responsible.

SECTION 9.13 ACCOUNTING. The Borrowers will not, and will not permit
any of their Subsidiaries to, change its fiscal year or make any change (a) in
accounting treatment or reporting practices, except as required by GAAP and
disclosed to the Lender, or (b) in tax reporting treatment, except as required
by law and disclosed to the Lender.

SECTION 9.14 COMPLIANCE WITH ERISA. The Borrowers (other than any
Subsidiary which is organized outside of the United States or its territories)
will not and will not permit any of their Subsidiaries to (a) terminate, or
permit any ERISA Affiliate to terminate, any Plan, or (b) permit circumstances
which give rise to a Termination Event described in Clause (b), (d) or (e) of
the definition of Termination Event with respect to a Plan.

SECTION 9.15 PROCEEDS OF NOTE. The Borrowers will not permit the
proceeds of the Note to be used for any purpose other than those permitted by
Section 7.11. Neither the Borrower nor any Person acting on behalf of the
Borrower has taken or will take any action which might cause any of the Loan
Documents to violate Regulation G, U, or X, or any other regulation of the
Board of Governors of the Federal Reserve System, or to violate Section 7 of
the Securities Exchange Act of 1934 or any rule or regulation thereunder, in
each case as now in effect or as the same may hereinafter be in effect.

SECTION 9.16 NEGATIVE PLEDGE AGREEMENTS. Neither any Borrower nor any
Subsidiary will create, incur, assume or suffer to exist any contract,
agreement, or understanding (other than this Agreement, the Loan Documents, the
Heller Loan Documents, and the Subordinated Liens and Subordinated Credit
Agreement) which in any way prohibits or restricts the granting, conveying,
creation, or imposition of any Lien on any of its Property or restricts any
Subsidiary from paying dividends to the Parent, or which requires the consent
of or notice to other Persons in connection therewith.

SECTION 9.17 HEDGING AGREEMENTS. Neither any Borrower nor any
Subsidiary will enter into any Hedging Agreement without the prior written
approval of the Lender.

ARTICLE X

FINANCIAL COVENANTS

Each Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or Lender has any Commitment hereunder, each
Borrower will perform and observe the following financial covenants:

SECTION 10.1 CONSOLIDATED TANGIBLE NET WORTH. The Parent and its
Subsidiaries will at all times maintain Consolidated Tangible Net Worth in an
amount not less than $57,000,000, except as may be adjusted below, increasing
annually by 90% of annual Consolidated Net Income (not reduced by losses)
beginning for the twelve month period ending December 31, 1999, and increasing
by (a) 100% of the amount of any equity issued by Parent, including, without
limitation, a secondary offering and (b) the value of the net tangible assets
acquired by issuing Parent's stock in the acquisition of another entity.

For fiscal year 1999 only, the required increase will be 90% of the
net amount of the actual reported fiscal year 1999 Consolidated Net Income
minus the Parent's cash payment of up to $7,300,000 payable to the sellers of
Dickson GMP International, Inc. (the "Dickson Payment"), but only if such
amount is positive. If the amount derived by calculating the difference in the
fiscal 1999 Consolidated Net Income and the Dickson Payment is negative, the
minimum Consolidated Tangible Net Worth shall be the greater of: (a)
$55,000,000, or (b) $60,000,000 less (1) the Dickson Payment; plus (2) fiscal
1999 Consolidated Net Income; less (3) $1,000,000. In years subsequent to 1999,
such adjusted minimum Consolidated Tangible Net Worth shall be increased
annually by 90% of annual Consolidated Net Income (not reduced by losses) and
by (a) 100% of the amount of any

equity issued by Parent, including, without limitation, a secondary offering
and (b) the value of the net tangible assets acquired by issuing Parent's stock
in the acquisition of another entity.

SECTION 10.2 CAPITAL EXPENDITURES. The Borrowers will not permit the
aggregate capital expenditures of the Borrowers and the Subsidiaries to exceed
$7,000,000 during any fiscal year.

SECTION 10.3 TOTAL FUNDED DEBT TO CAPITALIZATION. The Borrowers will
not permit the Parent's ratio of Total Funded Debt to Capitalization, on a
Consolidated basis, to exceed 0.40 at any time.

SECTION 10.4 FIXED CHARGE COVERAGE RATIO. The Parent and its
Subsidiaries on a Consolidated basis will at all times maintain a Fixed Charge
Coverage Ratio that exceeds 1.10 to 1.00. This ratio shall be calculated on a
cumulative quarterly basis beginning January 1, 1999, until such time as four
quarters have been reached on December 31, 1999. Thereafter, the ratio will be
calculated on a Rolling Period basis. The first test will be calculated at
March 31, 1999.

SECTION 10.5 SENIOR FUNDED DEBT TO EBITDA COVERAGE RATIO. The
Borrowers will not permit the ratio of Senior Funded Debt to EBITDA, on a
Consolidated basis (EBITDA being determined on a Rolling Period basis) to be
greater than the ratio for the times indicated below:

TIME PERIOD RATIO

12/01/1998 - 12/31/1999 2.50:1.0

01/01/2000 - 12/31/2000 2.25:1.0

01/01/2001 and thereafter 2.00:1.0

Upon the consummation of an acquisition not prohibited hereunder (including
historic acquisitions consummated within 12 months from the date hereof), the
calculation of EBITDA shall include, pro forma, the historical consolidated
EBITDA for the Parent and its Consolidated Subsidiaries for the relevant period
prior to the Parent's acquisition of such Subsidiaries.

ARTICLE XI

DEFAULT

SECTION 11.1 EVENTS OF DEFAULT. Each of the following shall be deemed
an "Event of Default":

(a) The Obligations or any part thereof shall not have been paid within
five (5) days of when such is due.

(b) Any representation or warranty made or deemed made by any Borrower
or any Obligated Party (or any of their respective officers) in any Loan
Document or in any certificate, report, notice, or financial statement
furnished at any time in connection with this Agreement shall be false,
misleading, or erroneous in any material respect when made or deemed to have
been made.

(c) Any Borrower shall fail to perform, observe, or comply with any
covenant, agreement, or term contained in Section 8.1 or 8.5, Article IX, or
Article X of this Agreement; or any Borrower or any Obligated Party shall fail
to perform, observe, or comply with any other covenant, agreement, or term
contained in this Agreement or any other Loan Document (other than covenants to
pay the Obligations) and such failure shall continue for a period of thirty
(30) days.

(d) Any Borrower, any Subsidiary, or any Obligated Party shall
commence a voluntary proceeding seeking liquidation, reorganization, or other
relief with respect to itself or its debts under any bankruptcy, insolvency, or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian, or other similar official of it or a
substantial part of its property or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it or shall make a general assignment for
the benefit of creditors or shall generally fail to pay its debts as they
become due or shall take any corporate action to authorize any of the
foregoing.

(e) An involuntary proceeding shall be commenced against any Borrower,
any Subsidiary, or any Obligated Party seeking liquidation, reorganization, or
other relief with respect to it or its debts under any bankruptcy, insolvency,
or other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official for it or a
substantial part of its property, and such involuntary proceeding shall remain
undismissed and unstayed for a period of 30 days.

(f) Any Borrower, any Subsidiary, or any Obligated Party shall fail to
discharge within a period of 30 days after the commencement thereof any
attachment, sequestration, or similar proceeding or proceedings involving an
aggregate amount in excess of $1,000,000 against any of its assets or
properties.

(g) A final judgment or judgments for the payment of money in excess
of $1,000,000 in the aggregate shall be rendered by a court or courts against
any Borrower, any of its Subsidiaries, or any Obligated Party and the same
shall not be discharged (or provision shall not be made for such discharge), or
a stay of execution thereof shall not be procured, within 30 days from the date
of entry thereof and the relevant Borrower or the relevant Subsidiary or
Obligated Party shall not, within said period of 30 days, or such longer
period during which execution of the same shall have been stayed, appeal
therefrom and cause the execution thereof to be stayed during such appeal.

(h) Any Borrower, any Subsidiary, or any Obligated Party shall fail to
pay when due any principal of or interest on any Debt (other than the
Obligations), including, without limitation, Debt under the Heller Loan
documents and/or the Subordinated Loan Documents or the maturity of any such
Debt shall have been accelerated, or any such Debt shall have been required to
be prepaid prior to the stated maturity thereof, or any event shall have
occurred that permits (or, with the giving of

notice or lapse of time or both, would permit) any holder or holders of such
Debt or any Person acting on behalf of such holder or holders to accelerate the
maturity thereof or require any such prepayment.

(i) This Agreement or any other Loan Document shall cease to be in
full force and effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by any Borrower, any
Subsidiary, any Obligated Party or any of their respective shareholders, or any
Borrower or any Obligated Party shall deny that it has any further liability or
obligation under any of the Loan Documents, or any lien or security interest
created by the Loan Documents shall for any reason cease to be a valid, first
priority perfected security interest in and lien upon any of the Collateral
purported to be covered thereby.

(j) Any Termination Event as defined in clause (b), (d) or (e) of the
definition thereof with respect to a Plan shall have occurred and, five days
after notice thereof shall have been given to any Borrower by the Lender, (i)
such Termination Event shall still exist.

(k) Any Borrower or any ERISA Affiliate shall have been notified by
the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability
to such Multiemployer Plan.

(l) Any Borrower or any ERISA Affiliate shall have been notified by the
sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of ERISA.

(m) Any Borrower or any of its Subsidiaries, or any of their
properties, revenues, or assets, shall become the subject of an order of
forfeiture, seizure, or divestiture (whether under RICO or otherwise) and the
same shall not have been discharged (or provisions shall not be made for such
discharge) within 30 days from the date of entry thereof.

(n) Any Person or Persons constituting a group (as such term is used in
Rule 13d-5 under the Securities Exchange Act of 1934 as in effect on the date
hereof) shall, in the aggregate, directly or indirectly, control or own
(beneficially or otherwise) more than 30% (by number of shares) of the issued
and outstanding voting stock of the Parent.

(o) Nathan Avery or a reasonable substitute thereof shall cease to be
active in the senior management of the Parent.

SECTION 11.2 REMEDIES. If any Event of Default shall occur and be
continuing, the Lender may do any one or more of the following:

(a) Acceleration. Declare an amount equal to the maximum
aggregate amount that is or at any time may become available for drawing by the
beneficiary under any outstanding Letters of Credit (whether or not any
beneficiary shall have presented, or shall be entitled at such time to present,
the drafts or other documents required to draw under such Letters of Credit) to
be immediately due and payable, and declare all outstanding principal of and
accrued and unpaid interest on the Note and all other obligations of any of the
Borrowers under the Loan Documents

immediately due and payable, and the same shall thereupon become immediately
due and payable, all without notice, demand, presentment, notice of dishonor,
notice of acceleration, notice of intent to accelerate, protest, or other
formalities of any kind, all of which are hereby expressly waived by the
Borrowers.

(b) Termination of Commitments. Terminate the Commitments
without notice to the Borrowers.

(d) Foreclosure. Foreclose or otherwise enforce any Lien
granted to the Lender to secure payment and performance of the Obligations in
accordance with the terms of the Loan Documents.

(e) Rights. Exercise any and all rights and remedies afforded
by the laws of the State of Texas or any other jurisdiction, by any of the Loan
Documents, by equity, or otherwise.

Provided, however, that upon the occurrence of an Event of Default under
Section 11.1(d) or 11.1(e), the Commitment of the Lender shall
automatically terminate, and the outstanding principal of and accrued and
unpaid interest on the Note and all other obligations of the Borrowers under
the Loan Documents shall thereupon become immediately due and payable without
notice, demand, presentment, notice of dishonor, notice of acceleration, notice
of intent to accelerate, protest, or other formalities of any kind, all of
which are hereby expressly waived by the Borrowers.

SECTION 11.3 PERFORMANCE BY THE LENDER. If any Borrower shall fail to
perform any covenant or agreement in accordance with the terms of the Loan
Documents, the Lender may perform or attempt to perform such covenant or
agreement on behalf of the Borrowers. In such event, the Borrowers shall, at
the request of the Lender, promptly pay any amount expended by the Lender in
connection with such performance or attempted performance to the Lender at the
Principal Office, together with interest thereon at the Default Rate from and
including the date of such expenditure to but excluding the date such
expenditure is paid in full. Notwithstanding the foregoing, it is expressly
agreed that the Lender shall not have any liability or responsibility for the
performance of any obligation of any Borrower under this Agreement or any of
the other Loan Documents.

ARTICLE XII

MISCELLANEOUS

SECTION 12.1 EXPENSES. The Borrowers hereby agree, jointly and
severally, to pay on demand: (a) all reasonable costs and expenses of the
Lender in connection with the preparation, negotiation, execution, and delivery
of this Agreement and the other Loan Documents and any and all amendments,
modifications, renewals, extensions, and supplements thereof and thereto,
including, without limitation, the fees and expenses of legal counsel for the
Lender, (b) all costs and expenses of the Lender in connection with any Default
and the enforcement of this Agreement or

any other Loan Document, including, without limitation, the fees and expenses
of legal counsel for the Lender, (c) all transfer, stamp, documentary, or other
similar taxes, assessments, or charges levied by any Governmental Authority in
respect of this Agreement or any of the other Loan Documents, (d) all costs,
expenses, assessments, and other charges incurred in connection with any
filing, registration, recording, or perfection of any security interest or Lien
contemplated by this Agreement or any other Loan Document, and (e) all other
reasonable costs and expenses incurred by the Lender in connection with this
Agreement or any other Loan Document, including, without limitation, all costs,
expenses, and other charges incurred in connection with obtaining any mortgagee
title insurance policy, survey, audit, or appraisal in respect of the
Collateral.

SECTION 12.2 INDEMNIFICATION. The Borrowers, jointly and severally,
shall indemnify the Lender and each Affiliate thereof and their respective
officers, directors, employees, attorneys, and agents from, and hold each of
them harmless against, any and all losses, liabilities, claims, damages,
penalties, judgments, disbursements, costs, and expenses (including attorneys'
fees) to which any of them may become subject which directly or indirectly
arise from or relate to (a) the negotiation, execution, delivery, performance,
administration, or enforcement of any of the Loan Documents, (b) any of the
transactions contemplated by the Loan Documents, (c) any breach by any Borrower
of any representation, warranty, covenant, or other agreement contained in any
of the Loan Documents, (d) the presence, Release, threatened Release, disposal,
removal, or cleanup of any Hazardous Material located on, about, within, or
affecting any of the properties or assets of any Borrower or any Subsidiary, or
(e) any investigation, litigation, or other proceeding, including, without
limitation, any threatened investigation, litigation, or other proceeding
relating to any of the foregoing. Without limiting any provision of this
Agreement or of any other Loan Document, it is the express intention of the
parties hereto that each Person to be indemnified under this Section shall be
indemnified from and held harmless against any and all losses, liabilities,
claims, damages, penalties, judgments, disbursements, costs, and expenses
(including attorneys' fees) arising out of or resulting from the sole or
contributory negligence of such Person.

SECTION 12.3 LIMITATION OF LIABILITY. None of the Lender or any
subsidiary, officer, director, employee, attorney, or agent thereof shall have
any liability with respect to, and any Borrower hereby waives, releases, and
agrees not to sue any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by any Borrower in
connection with, arising out of, or in any way related to, this Agreement or any
of the other Loan Documents, or any of the transactions contemplated by this
Agreement or any of the other Loan Documents, except for gross negligence or
willful misconduct in which event damages will be limited to actual damages.
Each Borrower hereby waives, releases, and agrees not to sue the Lender or any
of its subsidiaries, officers, directors, employees, attorneys, or agents for
punitive damages in respect of any claim in connection with, arising out of, or
in any way related to, this Agreement or any of the other Loan Documents, or any
of the transactions contemplated by this Agreement or any of the other Loan
Documents.

SECTION 12.4 NO DUTY. All attorneys, accountants, appraisers, and
other professional Persons and consultants retained by the Lender shall have the
right to act exclusively in the interest of the Lender and shall have no duty of
disclosure, duty of loyalty, duty of care, or other duty or

obligation of any type or nature whatsoever to any Borrower or any of the
Borrowers' shareholders or any other Person.

SECTION 12.5 NO FIDUCIARY RELATIONSHIP. The relationship between each
Borrower and the Lender is solely that of debtor and creditor, and the Lender
has no fiduciary or other special relationship with any Borrower, and no term
or condition of any of the Loan Documents shall be construed so as to deem the
relationship between any Borrower and the Lender to be other than that of
debtor and creditor.

SECTION 12.6 EQUITABLE RELIEF. Each Borrower recognizes that in the
event any Borrower fails to pay, perform, observe, or discharge any or all of
the Obligations, any remedy at law may prove to be inadequate relief to the
Lender. Each Borrower therefore agrees that the Lender, if the Lender so
requests, shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages.

SECTION 12.7 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of
the Lender to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power, or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege. The
rights and remedies provided for in this Agreement and the other Loan Documents
are cumulative and not exclusive of any rights and remedies provided by law.

SECTION 12.8 SUCCESSORS AND ASSIGNS.

(a) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. The
Borrowers may not assign or transfer any of their rights or obligations
hereunder without the prior written consent of the Lender. The Lender may,
sell, without notice to or consent of any Borrower, participations to one or
more banks or other institutions in or to all or a portion of its rights and
obligations under this Agreement and the other Loan Documents (including,
without limitation, all or a portion of the Revolving Credit Loan owing to it)
provided that such participation shall not result in additional costs to
Borrowers; provided, however, that (i) the Lender's obligations under this
Agreement and the other Loan Documents (including, without limitation, its
Commitment) shall remain unchanged, (ii) the Lender shall remain solely
responsible to the Borrowers for the performance of such obligations, (iii) the
Lender shall remain the holder of its Note for all purposes of this Agreement,
(iv) the Borrowers shall continue to deal solely and directly with the Lender
in connection with the Lender's rights and obligations under this Agreement and
the other Loan Documents, and (v) the Lender shall not sell a participation
that conveys to the participant the right to vote or give or withhold consents
under this Agreement or any other Loan Document, other than the right to vote
upon or consent to (A) any increase of the Lender's Commitment, (B) any
reduction of the principal amount of, or interest to be paid on, the Advances
of the Lender, (C) any reduction of any commitment fee or other amount payable
to the Lender under any Loan Document, or (D) any postponement of any date for
the payment of any amount payable in respect of the Advances of the Lender.

(b) The Lender may, without notice to or consent of any Borrower,
sell, assign or transfer to any one or more persons or entities, all or any
part of the Revolving Credit Loan or all or any part of the Loan Documents and
each such assignee or transferee shall have the right to enforce the Revolving
Credit Loan, and such Loan Documents as fully as the Lender, provided that the
Lender shall continue to have the unimpaired right to enforce the provisions of
the Loan Documents and the Revolving Credit Loan that it has not sold, assigned
or transferred.

(c) In connection with and prior to and after any such sale, transfer,
assignment or participation, the Lender may disclose and furnish to any
prospective or actual purchaser, transferee, assignee or participant, any and
all reports, financial statements and other information obtained by the Lender
at any time and from time to time in connection with the Revolving Credit Loan,
the Loan Documents or otherwise. The Borrowers shall fully cooperate with the
Lender in connection with any such assignment and shall execute and deliver
such consents and acceptances to any such assignment as the Lender shall
reasonably request that are necessary or desirable to effect any such
assignment.

SECTION 12.9 SURVIVAL. All representations and warranties made in this
Agreement or any other Loan Document or in any document, statement, or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by the Lender or any closing shall affect the representations and
warranties or the right of the Lender to rely upon them. Without prejudice to
the survival of any other obligation of the Borrowers hereunder, the
obligations of the Borrowers under Article IV and Sections 12.1 and 12.2 shall
survive repayment of the Note and termination of the Commitments.

SECTION 12.10 ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES, AND THE
OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT
AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR
DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE
PARTIES HERETO.

SECTION 12.11 AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement, the Notes, or any other Loan Document to which any
Borrower is a party, nor any consent to any departure by any Borrower
therefrom, shall in any event be effective unless the same shall be agreed or
consented to by the Lender and the Borrowers, and each such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.

SECTION 12.12 MAXIMUM INTEREST RATE.

(a) The Collateral covered in the Vessel Mortgage and the Obligations
covered by this Agreement, the Note and other Loan Documents is or will be
secured by a "Preferred Mortgage" on the Vessels within the meaning of Section
31322 of the Ship Mortgage Act, and the regulations

promulgated thereunder. If, for any reason, the provisions of Section 31322 of
the Ship Mortgage Act shall be found not to exempt any and all interest and
other charges contracted for, charged, taken, received or reserved in connection
with the Obligations covered by this Agreement, the Note, and other Loan
Documents from any limitations otherwise applicable, then the provisions of
Section 12.12(b) shall apply, but otherwise the provisions of Section 31322 of
the Ship Mortgage Act shall be applicable.

(b) No provision of this Agreement or of any other Loan Document shall
require the payment or the collection of interest in excess of the maximum
amount permitted by applicable law. If any excess of interest in such respect
is hereby provided for, or shall be adjudicated to be so provided, in any Loan
Document or otherwise in connection with this loan transaction, the provisions
of this Section shall govern and prevail and neither any of the Borrowers nor
the sureties, guarantors, successors, or assigns of any of the Borrowers shall
be obligated to pay the excess amount of such interest or any other excess sum
paid for the use, forbearance, or detention of sums loaned pursuant hereto. In
the event the Lender ever receives, collects, or applies as interest any such
sum, such amount which would be in excess of the maximum amount permitted by
applicable law shall be applied as a payment and reduction of the principal of
the indebtedness evidenced by the Note; and, if the principal of the Note has
been paid in full, any remaining excess shall forthwith be paid to the
Borrowers. In determining whether or not the interest paid or payable exceeds
the Maximum Rate, the Borrowers and the Lender shall, to the extent permitted
by applicable law, (a) characterize any non-principal payment as an expense,
fee, or premium rather than as interest, (b) exclude voluntary prepayments and
the effects thereof, and (c) amortize, prorate, allocate, and spread in equal
or unequal parts the total amount of interest throughout the entire
contemplated term of the indebtedness evidenced by the Note so that interest
for the entire term does not exceed the Maximum Rate.

SECTION 12.13 NOTICES. All notices and other communications provided
for in this Agreement and the other Loan Documents to which any Borrower is a
party shall be given or made by telex, telegraph, telecopy, cable, or in
writing and telexed, telecopied, telegraphed, cabled, mailed by certified mail
return receipt requested, or delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof;
or, as to any party at such other address as shall be designated by such party
in a notice to each other party given in accordance with this Section. Except
as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted by telex or telecopy, subject
to telephone confirmation of receipt, or delivered to the telegraph or cable
office, subject to telephone confirmation of receipt, or when personally
delivered or, in the case of a mailed notice, when duly deposited in the mails,
in each case given or addressed as aforesaid; provided, however, notices to the
Lender pursuant to Article II shall not be effective until received by the
Lender.

SECTION 12.14 GOVERNING LAW; VENUE; SERVICE OF PROCESS. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Texas and the applicable laws of the United States of America. This Agreement
has been entered into in Harris County, Texas, and it shall be performable for
all purposes in Harris County, Texas. Any action or proceeding against any
Borrower under or in connection with any of the Loan Documents may be brought
in any state or Federal court in Harris County, Texas. Each Borrower hereby
irrevocably (a) submits to the nonexclusive jurisdiction of such courts, and
(b) waives any objection it may now or hereafter have

as to the venue of any such action or proceeding brought in any such court or
that any such court is an inconvenient forum. Each Borrower agrees that service
of process upon it may be made by certified or registered mail, return receipt
requested, at its address specified or determined in accordance with the
provisions of Section 12-13. Nothing herein or in any of the other Loan
Documents shall affect the right of the Lender to serve process in any other
manner permitted by law or shall limit the right of the Lender to bring any
action or proceeding against any Borrower or with respect to any of its
property in courts in other jurisdictions. Any action or proceeding by any
Borrower against the Lender shall be brought only in a court located in Harris
County, Texas.

SECTION 12.15 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

SECTION 12.16 SEVERABILITY. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.

SECTION 12.17 HEADINGS. The headings, captions, and arrangements used
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.

SECTION 12.18 NON-APPLICATION OF CHARTER 346 OF TEXAS FINANCE CODE.
The provisions of Chapter 346 of the Texas Finance Code are specifically
declared by the parties hereto not to be applicable to this Agreement or any of
the other Loan Documents or to the transactions contemplated hereby.

SECTION 12.19 CONSTRUCTION. The Borrowers and the Lender acknowledge
that each of them has had the benefit of legal counsel of its own choice and
has been afforded an opportunity to review this Agreement and the other Loan
Documents with its legal counsel and that this Agreement and the other Loan
Documents shall be construed as if jointly drafted by the parties hereto.

SECTION 12.20 INDEPENDENCE OF COVENANTS. All covenants hereunder
shall be given independent effect so that if a particular action or condition
is not permitted by any of such covenants, the fact that it would be permitted
by an exception to, or be otherwise within the limitations of, another covenant
shall not avoid the occurrence of a Default if such action is taken or such
condition exists.

SECTION 12.21 JURY WAIVER. THE BORROWERS AND THE LENDER (BY THEIR
ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND
UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG ANY
BORROWER AND THE LENDER ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT,
ANY OF THE OTHER LOAN DOCUMENTS, OR ANY RELATIONSHIP BETWEEN THE LENDER AND ANY
BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE LENDER TO PROVIDE THE
FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS.

SECTION 12.22 ARBITRATION. The Lender and each Borrower agree that
upon the written demand of either party, whether made before or after the
institution of any legal proceedings, but prior to the rendering of any
judgment in that proceeding, all disputes, claims and controversies between
them, whether individual, joint, or class in nature, arising from this
Agreement, or any of the Loan Documents or otherwise, including, without
limitation, contract disputes and tort claims, shall be resolved by binding
arbitration pursuant to the Commercial Rules of the American Arbitration
Association ("AAA"). Any arbitration proceeding held pursuant to this
arbitration provision shall be conducted in Houston, Texas having an AAA
regional office, or at any other place selected by mutual agreement of the
parties. No act to take or dispose of any Collateral shall constitute a waiver
of this arbitration agreement or be prohibited by this arbitration agreement.
This arbitration provision shall not limit the right of either party during any
dispute, claim or controversy to seek, use, and employ ancillary, or
preliminary rights and/or remedies, judicial or otherwise, for the purposes
of realizing upon, preserving, protecting, foreclosing upon or proceeding under
forcible entry and detainer for possession of, any real or personal property,
and any such action shall not be deemed an election of remedies. Such remedies
include, without limitation, obtaining injunctive relief or a temporary
restraining order, invoking a power of sale under any deed of trust or
mortgage, obtaining a writ of attachment or imposition of a receivership, or
exercising any rights relating to personal property, including exercising the
right of set-off, or taking or disposing of such property with or without
judicial process pursuant to the Uniform Commercial Code. Any disputes, claims
or controversies concerning the lawfulness or reasonableness of an act, or
exercise of any right or remedy concerning any Collateral, including any claim
to rescind, reform, or otherwise modify any agreement relating to the
Collateral, shall also be arbitrated; provided, however, that no arbitrator
shall have the right or the power to enjoin or restrain any act of either
party. Judgment upon any award rendered by any arbitrator may be entered in any
court having jurisdiction. The statute of limitations, estoppel, waiver, laches
and similar doctrines which would otherwise be applicable in an action brought
by a party shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the commencement of
any action for these purposes. The Federal Arbitration Act (Title 9 of the
United States Code) shall apply to the construction, interpretation, and
enforcement of this arbitration provision.

SECTION 12.23 CONFIDENTIALITY. In the event that any of the Borrowers
provides to the Lender written confidential information belonging to such
Borrower, if such Borrower shall denominate such information in writing as
"confidential", the Lender shall thereafter maintain such information in
confidence in accordance with the standards of care and diligence that such
utilizes in maintaining its own confidential information. This obligation of
confidence shall not apply to such portions of the information which (i) are in
the public domain, (ii) hereafter become part of the public domain without the
Lender breaching its obligation of confidence to such Borrower, (iii) are
previously known by the Lender from some source other than such Borrower, (iv)
are hereafter developed by the Lender without using the Borrower's information,
(v) are hereafter obtained by or made available to the Lender from a third
party who the Lender is not aware owes any obligation of confidence to such
Borrower with respect to such information or through any other means other than
through disclosure by such Borrower, (vi) are disclosed with such Borrower's
consent, (vii) must be disclosed either pursuant to any Governmental
Requirement or to Persons regulating the activities of the Lender, or (viii) as
may be required by law or regulation or order of any Governmental Authority in
any judicial, arbitration, or governmental proceeding. Further, the

Lender may disclose any such information to its independent certified public
accountants and/or any legal counsel, Heller, the Subordinated Lender, any
independent certified public accountants, and/or legal counsel employed by such
Person in connection with this Agreement or any other Loan Document, including
without limitation, the enforcement or exercise of all rights and remedies
thereunder, or any assignee or participant (including prospective assignees and
participants) in the Revolving Credit Loan; provided, however, that the Lender
shall receive a confidentiality agreement from the Person to whom such
information is disclosed such that said Person shall have the same obligation
to maintain the confidentiality of such information as is imposed upon the
Lender hereunder. Notwithstanding anything to the contrary provided herein,
this obligation of confidence shall cease three years from the date the
information was furnished, unless such Borrower requests in writing at least
30 days prior to the expiration of such three year period, to maintain the
confidentiality of such information for an additional three year period. Each
Borrower waives any and all other rights it may have to confidentiality as
against the Lender arising by contract, agreement, statute, or law except as
expressly stated in this Section 12.23.

IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

BORROWERS:

TRANSCOASTAL MARINE SERVICES, INC.;
DICKSON MARINE, INC.;
VENTURA RESOURCES, INC.;
WOODSON CONSTRUCTION COMPANY, INC.;
ENVIRO SYSTEMS, INC.;
KORI CORPORATION;
C.S.I. HYDROSTATIC TESTERS, INC.;
HARGETT MOORING AND MARINE, INC.;
HBH, INC.;
TRANSCOASTAL MARINE SERVICES OF LA, INC.;
DICKSON GMP INTERNATIONAL, INC.;
THE RED FOX COMPANIES OF IBERIA, INC.; and
TRANSCOASTAL VESSELS, INC.

By: /s/ PAMELA L. REILAND
-----------------------------------------
Pamela L. Reiland
Authorized Officer for all Borrowers

Address for Notices (all Borrowers):
2925 Briarpark, Suite 930
Houston, Texas 77042
Fax No.: (713) 781-6364
Telephone No.: (713) 787-1384
Attention: President

LENDER:

BANK ONE, TEXAS, NATIONAL ASSOCIATION

By: /s/ KAREN S. SHOUSE
------------------------------------
Karen S. Shouse
Vice President

Address for Notices:

Bank One, Texas, National Association
910 Travis, Suite 2400
Houston, Texas 77024

Fax No.: 713/751-6199
Telephone No.: 713/751-3640
Attention: Karen S. Shouse

INDEX TO EXHIBITS

Exhibit Description of Exhibit Section
- ------- ---------------------- -------

"A" Advance Request Form 1.1
"B" Borrowing Base Report 8.1(1)

INDEX TO SCHEDULES

Schedule Description of Schedule Section
- -------- ------------------------ -------

1 Specific Fixed Collateral 1.1
2 Vessels 1.1
7.5 Litigation and Judgments 7.5
7.6(d) Rights in Properties; Liens 7.6(d)
7.9 Debt 7.9
7.10 Taxes 7.10
7.14 Subsidiaries 7.14
7.20 Environmental Matters 7.20
7.22 Insurance 7.22
7.23 Hedging Agreements 7.23
7.25 Material Debt Agreements 7.25
9.2 Liens 9.2

EXHIBIT "A"

ADVANCE REQUEST FORM

AS OF MONTH ENDING:
-------------,-------

GROSS ACCOUNTS RECEIVABLE
$
-----------------
LESS:
Accounts Receivable > 90 days $
----------------
Retainage
----------------
Bonded Jobs
----------------
Ineligible Foreign Accounts Receivable
----------------
Other Ineligible Accounts Receivable
---------------- -----------------
Eligible Accounts Receivable
-----------------
LESS:
Billings in excess of cost on Eligible Accounts
Receivable
-----------------
ELIGIBLE ACCOUNTS RECEIVABLE, NET OF BILLINGS
IN EXCESS OF COSTS
-----------------
ADVANCE RATE ON ACCOUNTS RECEIVABLE 80%

AVAILABILITY ON ACCOUNTS RECEIVABLE (a)
--------------
ELIGIBLE INVENTORY BALANCE
-----------------
ADVANCE RATE ON INVENTORY 50%

AVAILABILITY ON INVENTORY (b)
--------------
TOTAL AVAILABILITY ON REVOLVER (a + b)
LOAN BALANCE AT ______________ -----------------

-----------------

EXCESS AVAILABILITY OVER LOAN BALANCE $
=================
AMOUNT OF ADVANCE REQUEST $
-----------------
AMOUNT OF LETTER OF CREDIT REQUEST $
-----------------

EXHIBIT "B"
BORROWING BASE REPORT FORM
AS OF MONTH ENDING:
-------------,-------

AVAILABILITY ON ACCOUNTS RECEIVABLE (a)
--------------
ELIGIBLE INVENTORY BALANCE
-----------------
ADVANCE RATE ON INVENTORY 50%

AVAILABILITY ON INVENTORY (b)
--------------
TOTAL AVAILABILITY ON REVOLVER (a + b)
LOAN BALANCE AT ______________________ -----------------

-----------------

EXCESS AVAILABILITY OVER LOAN BALANCE $
=================
AMOUNT OF ADVANCE REQUEST $
-----------------
AMOUNT OF LETTER OF CREDIT REQUEST $
-----------------

SCHEDULE 1

LIST OF EQUIPMENT
(more fully described in Schedule "1" Attachment 1
attached hereto)

ASSET NAME TYPE DESCRIPTION
===========================================================================================================

Drydock Drydock 3,400 ton; Dimensions of 236' x 100' with 85' between wing walls
- -----------------------------------------------------------------------------------------------------------
Jetting Jet Pumps, Etc. TCMS Equipment #10697, EMD Engine Model #16-567-03A with
Equipment Bingham 8' x 10' 4-stage Jet Pump and Lufkin Gear Box Model
(Mexican site) #N1460C; jet sleds and pipe; located on Cable 1 Vessel
- -----------------------------------------------------------------------------------------------------------
Jetting Jet Pumps, Etc. 3 single stage pumps; 5 5-stage pumps; EMD Engine Model
Equipment #16-567-D3A with Bingham 8' x 10' 4-stage Jet Pump with Lufkin Gear
(Lafayette site) Box Model #N1604C; jet sleds and pipe
- -----------------------------------------------------------------------------------------------------------
BH 100 Spud Barge American flag; dimensions of 110' x 34' x 6'
- -----------------------------------------------------------------------------------------------------------
Rowe 14 Crane Barge American flag; dimensions of 110' x 34' x 7.3'; approximately
20 years old
- -----------------------------------------------------------------------------------------------------------
Barge Construction American flag; dimensions of 250' x 50' x 12'; built by
Barge Nashville Bridge Company in Nashville, TN in 1953
- -----------------------------------------------------------------------------------------------------------
#7101 Spud Barge American flag; dimensions of 136' x 35' x 7.6'; built by
Nashville Bridge Company in Nashville, TN in 1966
- -----------------------------------------------------------------------------------------------------------
#7102 Spud Barge American flag; dimensions of 136' x 35' x 7.6'; built by
Nashville Bridge Company in Nashville, TN in 1966
- -----------------------------------------------------------------------------------------------------------
Barge Office Barge American flag; dimensions of 208' x 26' x 5'; built by
Nashville Bridge Company in Nashville, TN (forward vessel
in 1941, hull no. 579 and after vessel in 1955, hull no. H 34)
- -----------------------------------------------------------------------------------------------------------
TCMS 612 Spud Barge American flag; dimensions of 140' x 39' x 9'
- -----------------------------------------------------------------------------------------------------------
BH 201 Spud Barge American flag; dimensions of 90' x 23' x 5'
- -----------------------------------------------------------------------------------------------------------
MMVII Spud Barge American flag; dimensions of 120' x 32' x 7';
approximately 25 years old
===========================================================================================================

79
[BACHRACH, WOOD, PETERS AND ASSOCIATES, INC. LETTERHEAD]

December 11, 1998

Inspection - Ascertain
General Condition and
Fair Market Value
as of
December 7, 1998

SURVEY REPORT NO. 9812-1225

3400 TON DRYDOCK

THIS IS TO CERTIFY that the undernamed attending Marine Surveyor did on December
7, 1998, at the request of Ms. Karen S. Shouse, on behalf of and for the account
of Bank One, Texas, NA, survey the 3400 ton drydock (Transcoastal Marine
Services, Inc.- reported owners) while subject drydock was lying afloat at the
facilities of Red Fox on Industrial Canal in New Orleans, Louisiana, in order to
ascertain the general condition and in order to estimate her present day fair
market value and orderly liquidation value as of December 7, 1998.

Note: All sizes, measurements, distances, et cetera, mentioned herein are
approximate, unless otherwise specified.

GENERAL CONSTRUCTION PARTICULARS:

Note: For reporting purposes, the end of the drydock with the male notch
assembly is considered to be the bow.

The drydock was built of all welded steel construction by securing four (4)
smaller drydock sections into one (1) larger unit with an overall dimension of
236'x 100' with 85' between the wing walls and a combined capacity of 3,400
tons.

Original thickness of all plating appears to be 3/8".

Deck fittings consists of various single and double bitts, as well as padeyes
ranged across the forward and after ends of the main deck.

HULL SECTIONS:

The hull sections are arranged as follows:
80
SURVEY REPORT NO. 9812-1225

HULL SECTIONS: (continued)

First Section:

The forward section is a 39' x 100' section with two (2) 16' x 7.5' x 15' wing
walls ranged along both port and starboard sides. Extending forward of the bow
is a fabricated steel male notch assembly which measures 19'x 60' with a 48"
cast steel kevel location in way of the center line. Each wing wall has its
upper perimeter contained by cable handrails.

Atop the port wing wall was the following:

One (1) 6" double bitt.
Two (2) valve handles.
Two (2) 6" vents.
One (1) manual securing winch.
One (1) covered shack.
Two (2) U.S. Motors, Model F407A, 15 HP electric motors each rated at 1765 RPM
which power two (2) low lift pumps of unknown capacity.

Atop the starboard wing wall was the following:

One (1) 6" diameter double bitt.
One (1) manually operated winch.
Two (2) 6' vents.
Three (3) Valve handles.
One (1) electrical panel/operators station which has a surrounding steel shack.
Two (2) U.S. Motors, model F407A, 15 HP electric motors each rated at 1765 RPM
which power two (2) low lift pumps of unknown capacity.

Second Section:

The second section is a 70' x 100' section with one (1) 70' x 7.5' x 16' wing
wall section ranged along both port and starboard side. Each wing wall has its
upper ranged along both port and starboard side. Each wing wall has its upper
perimeter contained by round bar handrail system.

Atop the port wing wall is the following:

Two (2) 12" double bitts ranged along the outboard edge.
Two (2) mercury vapor lights.
Two (2) 4" vents.
One (1) 12" vent.
One (1) valve handle.
One (1) manually operated winch.
Five (5) 10" single bitts.

81
SURVEY REPORT NO. 9812-1225

HULL SECTIONS: (continued)

SECOND SECTION: (continued)

One (1) 50 HP electric motor which powers a Fairbanks Morse deepwell pump of
unknown capacity.

Atop the starboard wing wall is the following:

Two (2) 12" double bitts ranged along the outboard edge.
Two (2) valves.
One (1) 12" vent.
Two (2) 4" vents.
Two (2) mercury vapor lights.
One (1) manually operated winch.
One (1) 10" D ring.
Seven (7) 6" single bitts.
One (1) electrical panel covered by a steel top.
One (1) 50 HP electric motor which powers a Fairbanks Morse deepwell pump of
unknown capacity.

Third Section:

The third section is a 70' x 100' section with one (1) 70' x 7.5' x 16' wing
wall section ranged along both port and starboard sides. Each wing wall has its
upper perimeter contained by round bar handrail system.

Atop the port wing wall is the following:

Two (2) 12" double bitts ranged along the outboard edge.
One (1) mercury vapor light.
Two (2) manually operated winches.
One (1) 12" vent.
Two (2) 4" vents.
One (1) valve handle.
Six (6) single bitts.
One (1) cover shack.
One (1) 50 HP electric motor which powers a Fairbank Morse deepwell pump of
unknown capacity.

Atop the starboard wing well is the following:

Two (2) 12" double bitts ranged along the outboard edge.
Two (2) valve handles.
Two (2) 4" vents.
82
SURVEY REPORT NO. 9812-1225

HULL SECTIONS: (continued)

Third Section: (continued)

One (1) 12" vent.
One (1) manually operated winch.
Nine (9) 6" single bitts.
One (1) mercury vapor light.
One (1) 50 HP electric motor which powers a Fairbanks Morse deepwell pump of
unknown capacity.

Fourth Section:

The fourth section is a 56' x 100' section with two (2) 16' x 7.5' x 15' wing
wall section ranged along both port and starboard sides. Each wing wall has its
upper perimeter contained by pipe handrail system.

Atop the port wing wall is the following:

Two (2) 6" double bitts ranged along the inboard edge.
One (1) 8" D ring.
Four (4) 8" vents.
Four (4) valve handles.
One (1) electric winch complete with a 5 HP motor.
Two (2) mercury vapor lights.
One (1) 30 lb. fire extinguisher.
One (1) 30" ring buoy.
One (1) 15 HP electric motor which powers a Fairbank Morse deepwell pump of
unknown capacity.

Atop the starboard wing wall is the following:

One (1) 6" double bitt located aft.
One (1) 8" double bitt located inboard.
Four (4) valve handles.
Four (4) 8" vents.
Nine (9) 6" single bitts.
One (1) electric winch without a motor.
One (1) manually operated winch.
Two (2) mercury vapor lights.
One (1) electrical panel/operator station covered by a steel roof.
One (1) 30" ring buoy.

83
SURVEY REPORT NO. 9812-1225

HULL SECTIONS: (continued)

Fourth Section: (continued)

One (1) 15 HP electric motor which powers a Fairbank Morse deepwell pump of
unknown capacity.

EXTERNAL CONDITION:

Note: Only an external survey could be performed due to the lower hull
compartments containing ballast water.

The drydock was sighted afloat with a 250' vessel hauled out.

The deck was partially covered with 6" to 1' of blasting sand. Where sighted,
deck plating was lightly washboarded with random indents of 0 to 1".

The wing walls contain light distortion with random indents of 0 to 1".

External coating was recently applied over 90% of the vessel and appears to
be in excellent condition.

Electrical wiring, where sighted, appears to be in excellent condition.

VALUATION:

Estimated present day fair market value
as of December 7, 1998.................................$ 2,750,000.00

Fair Market Value:

A sum of money that a vessel should bring in a competitive and open
market under all conditions requisite to a fair sale, the buyer and
seller, each acting prudently, knowledgeably, and assuming the price
is not affected by undue stimulus. Implicit in this definition is the
consummation of a sale where title is passed from seller to buyer
under condition whereby:

1. The buyer and seller are typically motivated.

2. Both parties are well informed and acting in what they consider
their own best interest.

3. A reasonable time is allowed for exposure in the open market.

84
SURVEY REPORT NO. 9812-1225

VALUATION: (continued)

Estimated orderly liquidation value
as of December 7, 1998........................................... $ 2,400,000.00

The estimated gross amount expressed in terms of money which could be
typically realized from a sale, given a reasonable period of time to find
a purchaser(s), the seller being compelled to sell on an is-where is basis.

SURVEYOR'S NOTES:

Reportedly, all wasted external hull plating has been cropped and renewed as
found necessary.

Reportedly, internal hull compartments had all wasted structural members
cropped and renewed as found necessary with additional internals added to
reinforce the deck.

Reportedly, all internal and external anodes have recently been renewed.

Reportedly, all lower hull compartments have been cleaned and recoated with
Texaco Compound H.

All machinery and equipment on the drydock appears to be in good condition and
well coated.

This drydock, as described herein, is in satisfactory condition for its
intended service.

This survey represents the good faith opinion of the surveyor only and does not
make any representations of fact. It was performed for insurance underwriting
and/or appraisal purposes only, and no warranty of correctness of this surveyor
as to the condition, seaworthiness, value, or marketability of subject drydock
is either expressed or implied.

The drydock was sighted afloat, without testing for tightness, hull gauging,
conducting sea trials, testing or trying out machinery or electrical systems, or
opening up any of those places ordinarily closed or concealed. Therefore,
deficiencies may exist other than those conditions noted in this report.

The undersigned Marine Surveyor has no present or contemplated future interest
in the aforementioned drydock and/or its equipment, and compensation for
services has been arranged for on an independent fee basis and is in no way
contingent upon the values reported herein.

Survey made, signed and submitted without prejudice to rights and/or interests
of whom it may concern.
85

SURVEY REPORT NO. 9812-1225

SURVEYOR'S NOTES: (continued)

Attending Surveyor:

Kevin A. Jacomine

BACHRACH, WOOD, PETERS & ASSOCIATES, INC.

[SEAL]

/s/ ANTHONY C. PETERS
-----------------------------------------
Anthony C. Peters,
Principal Surveyor.

KAJ:ktb

Distribution:

(2) Reports & (2) invoices:
Bank One, Texas, NA
Attention: Ms. Karen S. Shouse
910 Travis Street, 7th Floor
TX-2 4260
Houston, Texas 77002

(1) Report:
Transcoastal Marine Services, Inc.
Attention: Mr. John Nowlin
183 Beadle Road
Lafayette, Louisiana 70508
86
[BACHRACH, WOOD, PETERS & ASSOCIATES, INC. LETTERHEAD]

December 08, 1998

Inspection - Ascertain
General Condition and
Fair Market Value
as of
December 4, 1998

SURVEY REPORT NO. 9812-1227

TRANSCOASTAL MARINE SERVICES, INC. JETTING EQUIPMENT
MEXICO

THIS IS TO CERTIFY that the undernamed attending Marine Surveyor did on December
4, 1998, at the request of Ms. Karen S. Shouse, on behalf of and for the account
of Bank One, Texas, NA, survey Jetting Equipment temporarily on board the barge
"Cable I", and reportedly owned by Transcoastal Marine Services, Inc. while the
Cable I lay afloat and anchored approximately 5 miles northeast of Ciudad Del
Carmen, Campeche, Mexico in order to ascertain the general condition of the
equipment and in order to estimate its present day fair market value and orderly
liquidation values as of December 4, 1998.

Note: All sizes, measurements, distances, et cetera, mentioned herein are
approximate, unless otherwise specified.

GENERAL DESCRIPTION AND CONDITION:

One steel, state of the art, jetting sled with adjustable legs capable of
operating at pressures of 500 psi and a volume of 3600 gallons per minute and
capable of burying pipe 12" to 36" in diameter to a depth of as much as 16 feet
below mud line. This equipment was found in excellent condition.

One skid mounted "A" frame approximately 50 feet long and constructed with steel
30" "I" beam legs and two 30" "I" beam cross beams. The "A" frame is fit with a
36" diameter x 20 foot long hose roller, has an 80 ton capacity and can be
raised and lowered utilizing built-in hydraulic rams. The unit is capable of
being moved from vessel to vessel as a unit. The unit was found to be in
excellent condition.

One skid mounted 3 cylinder General Motors, model 3-53, diesel engine drives a
Vickers vane pump for operating the hydraulic rams of the "A" frame. The engine
is electric starter and radiator cooled and appeared in very good condition.
87

SURVEY REPORT NO. 9812-1227

GENERAL DESCRIPTION AND CONDITION:

One Continental skid mounted model TMD 27, 4 cylinder diesel engine drives a
Parker model PFV 125B1711FNI vane pump to power a large diameter hose reel. The
engine is electric starting and radiator cooled and appears in new condition.

One skid mounted hydraulic powered 12 foot diameter steel hose reel which is
remotely powered from a hydraulic pressure source. The reel is fit with 300
feet of 8" diameter 1000 psi water hose. The hose reel is additionally fit
with 300 feet of 6" diameter high pressure air supply hose. The hose reel was
built by Marine Project Development Limited of Hull in Great Britain and the
hose reel unit and hoses appeared in very good condition.

2,600 feet of 1/2" high pressure hydraulic hose for the sensor units used for
positioning a jetting sled. The hoses appeared in good condition.

One steel water manifold for a jet pumping system constructed of 8" diameter
pipe and 8" valves which can be arranged to operate two high pressure water
pumps. This unit appeared in very good condition.

One skid mounted Viking, 50 ton line pull, 48" diameter single drum which driven
by a Hagglunds hydraulic motor through a Hagglund reduction gear. The drum is
fit with 4,000 feet of 1" steel cable. The unit and cable appeared in excellent
condition.

One skid mounted, Deutz 6 cylinder, turbocharged diesel engine driving a 12"
Gorman-Rupp 7,000 gallon per minute water supply pump which can deliver at 40
psi. The engine is electric starting and air cooled and appeared in nearly new
condition.

Two frame mounted Gardner-Denver 750 cubic feet per minute at 125 psi, air
compressors are each driven by General Motors 6 cylinder model 6-71 diesel
engine. Each engine is electric starting and radiator cooled. Each engine was
reportedly recently overhauled and each unit appeared in good condition.

One skid mounted 16 cylinder EMD model 16-645E5, turbocharged, 3,000 brake horse
power diesel engine drives a Lufkin 4 to 1 increase gear and a Bingham model
MSB 5/4 8 x 10 x 12.5, 3,000 gallon per minute at 1,000 psi, high pressure water
pump. The engine is air starting and heat exchanger cooled. The Lufkin gears
are reportedly new and appear in excellent condition. The Bingham pump appears
in excellent condition and is reportedly operative. The main engine appears in
excellent condition and was reportedly last overhauled 900 operating hours ago.

One Rasmussen Equipment Company skid mounted, double drum Skagit, model RB-90
winch is driven by General Motors 8 cylinder model V-8-71 diesel engine through
a Twin Disc torque converter and a system of gears and chains. The engine is
electric starting and radiator cooled. The engine is fit with a takeoff for
running its own winch controls. The

SURVEY REPORT NO. 9812-1227

GENERAL DESCRIPTION AND CONDITION:

engine appears in excellent condition and it reportedly nearly new. The winch
appears in excellent condition.

VALUATION:

Estimated present day fair market value of above described equipment as
sighted December 04, 1998.................................$ 1,300,000.00

Fair Market Value:

A sum of money that equipment should bring in a competitive and open market
under all conditions requisite to a fair sale, the buyer and seller, each
acting prudently, knowledgeably, and assuming the price is not affected by
undue stimulus. Implicit in this definition is the consummation of a sale
where title is passed from seller to buyer under condition whereby:

1. The buyer and seller are typically motivated.

2. Both parties are well informed and acting in what they consider their
own best interest.

3. A reasonable time is allowed for exposure in the open market.

Estimated orderly liquidation value of above described equipment as sighted
of December 04, 1998.......................................$ 1,000,000.00

The estimated gross amount expressed in terms of money which could be
typically realized from a sale, given a reasonable period of time to find a
purchaser(s), the seller being compelled to sell on an is-where is basis.

SURVEYOR'S NOTES:

This survey represents the good faith opinion of the surveyor and does not
make any representations of fact. It was performed for insurance
underwriting and/or appraisal purposes only, and no warranty of
correctness of this surveyor as to the condition, seaworthiness, value, or
marketability of subject vessel is either expressed or implied.

The undersigned Marine Surveyor has no present or contemplated future
interest in the aforementioned vessel and/or its equipment, and
compensation for services has been arranged for on an independent fee
basis and is in no way contingent upon the values reported herein.

89
SURVEY REPORT NO. 9812-1227

SURVEYOR'S NOTES: (continued)

Survey made, signed, and submitted without prejudice to rights and/or interests
of whom may concern.

Attending Surveyor:

John M. Swanson

BACHRACH, WOOD, PETERS & ASSOCIATES, INC.

/s/ ANTHONY C. PETERS
-----------------------------------------
Anthony C. Peters,
Principal Surveyor.

[SEAL]

JMS:maw

Distribution:

(2) Reports & (2) Invoices:
Bank One, Texas, NA
Attention: Ms. Karen S. Shouse
910 Travis Street, 7th Floor
TX-2 4260
Houston, Texas 77002

(1) Report:
Transcoastal Marine Services, Inc.
Attention: Mr. John Nowlin
183 Beadle Road
Lafayette, Louisiana 70508
90
[BACHRACH, WOOD, PETERS & ASSOCIATES, INC. LETTERHEAD]

December 11, 1998

Inspection - Ascertain
General Condition and
Fair Market Value
as of
December 8, 1998

SURVEY REPORT NO. 9812-1226

JETTING EQUIPMENT
(LAFAYETTE SITE)

THIS IS TO CERTIFY that the undernamed attending Marine Surveyor did on
December 8, 1998, at the request of Ms. Karen S. Shouse, on behalf of and for
the account of Bank One Texas, NA, survey miscellaneous jetting equipment
(Transcoastal Marine Services, Inc. reported owners) while the equipment was
located at the facility of CSI in Lafayette, Louisiana, in order to ascertain
the general condition of the equipment and in order to estimate its present day
fair market value and orderly liquidation values of December 8, 1998.

Note: All sizes, measurements, distances, et cetera, mentioned herein are
approximate, unless otherwise specified.

GENERAL DESCRIPTION AND CONDITION:

The following equipment was sighted in Lafayette, Louisiana. All appeared to be
in good condition and reportedly operative.

SINGLE STAGE PUMPS:

Unit No. FP-8, Goulds single stage pump, powered by a GM 8V-71 diesel engine
(see photo No. 1).

Unit No. FP-11, Carver, model ETN-20-50, single stage 10"x8" pump powered by a
GM 8V-71 diesel engine (see photo No. 2).

Unit No. FP-13, Carver, model ETN-20-50, single stage 10"x8" pump powered by GM
8V-71 diesel engine (see photo No. 3).
91
SURVEY REPORT NO. 9812-1226

GENERAL DESCRIPTION AND CONDITION: (continued)

4-STAGE PUMPS:

Unit No. HFP-97, Bingham, model MSB 5/4, 4-stage (destaged from 5-stage) 8 x 10
x 12.5 pump, powered by a 16 cylinder EMD, model 16-567-D3A, turbocharged, 1,800
brake horse power diesel engine, which drives a Lufkin, model N1604C, 3.977 to 1
gear box. The engine is air starting and heat exchanger cooled. The Lufkin gears
are reportedly new and appear in excellent condition. The Bingham pump appears
in excellent condition and is reportedly operative. The main engine appears in
excellent condition (see photos Nos. 4 and 5).

5-STAGE PUMPS:

Unit No. HFP-1, Carver, model 1500 N5, 5-stage 8" x 6" pump powered by a GM
12V-92 diesel engine (see photo No. 6).

Unit No. HFP-2, Carver, model 1500 N5, 5-stage 8" x 6" pump powered by a GM
16V-71 diesel engine (see photo No. 7).

Unit No. HFP-3, Carver, model 1500 N5, 5-stage 8" x 6" pump powered by a GM
16V-71 diesel engine (see photo No. 8).

Unit No. HFP-4, Carver, model 1500 N5, 5-stage 8" x 6" pump powered by a GM
16V-71 diesel engine (see photo No. 9).

Unit No. HFP-98, Carver, model 1500B-5, 5-stage 8" x 6" pump powered by a GM
16V-71 turbocharged diesel engine (see photo No. 10).

Unit No. HR-3, a skid mounted hydraulic powered 8-foot diameter steel hose
reel, which has an onboard diesel powered hydraulic pressure source. The reel
is designed to hold 4* diameter high pressure air supply hose, but without any
hose at the time of survey (see photo No. 12).

HOSE REELS:

Unit No. HR-1, a skid mounted hydraulic powered 10-foot diameter steel hose
reel, which is remotely powered from a hydraulic pressure source. The reel is
fit with 300 feet of 5" diameter 1000 psi water hose. The hose reel is
additionally fit with 300 feet of 3" diameter high pressure air supply hose
(see photo No. 11).

Unit No. HR-3, a skid mounted hydraulic powered 8-foot diameter steel hose reel,
which has an onboard diesel powered hydraulic pressure source. The reel is
designed to hold diameter high pressure air supply hose, but without any hose at
the time of survey (see photo No. 12).

JET SLEDS:

Unit No. JS-1, a small jetting sled designed to accept a 6" high pressure water
line and [ILLEGIBLE] to 3" high pressure air supply line, capable of burying
pipe up to 6" in diameter to a depth of 4 feet below the mud line (see photo No.
13).
92
SURVEY REPORT NO. 9812-1226

GENERAL DESCRIPTION AND CONDITION: (continued)

JET SLEDS: (CONTINUED)

Unit No. JS-2, a medium sized jetting sled, designed to accept a 6" high
pressure water line and a 2" to 3" high pressure air supply line. Unit No. JS-2
could not be visually sighted due to it being currently used at job sight in
New Orleans, Louisiana.

MISCELLANEOUS EQUIPMENT:

300 feet of 8" diameter 1000 psi jet hose is being stored at the CSI Facility,
which is designed to reel onto Unit No. HR-2, which is currently in use in
Mexico. This hose is in almost new condition and was recently purchased for a
reported amount of $50,000.00

VALUATION:

Estimated present day fair market value of above described
equipment as sighted December 8, 1998............................. $ 935,000.00

FAIR MARKET VALUE:

A sum of money that equipment should bring in a competitive and open
market under all conditions requisite to a fair sale, the buyer and
seller, each acting prudently, knowledgeably, and assuming the price is
not affected by undue stimulus. Implicit in this definition is the
consummation of a sale where title is passed from seller to buyer under
condition whereby:

1. The buyer and seller typically motivated.

2. Both parties are well informed and acting in what they consider their
own best interest.

3. A reasonable time is allowed for exposure in the open market.

Estimated orderly liquidation value of above described equipment
as sighted of December 08, 1998................................... $ 840,000.00

SURVEYOR'S NOTES:

This survey represents the good faith opinion of the surveyor only and does not
make any representations of fact. It was performed for insurance underwriting
and/or appraisal
93
[BACHRACH, WOOD, PETERS & ASSOCIATES, INC. LETTERHEAD]

December 11, 1998

Inspection - Ascertain
General Condition and
Fair Market Value
as of
December 2, 1998

SURVEY REPORT NO. 9811-1221

SPUD BARGE "BH 100"

THIS IS TO CERTIFY that the undernamed attending Marine Surveyor did on
December 2, 1998, at the request of Ms. Karen S. Shouse, on behalf of and for
the account of Bank One, Texas, NA, survey the spud barge "BH 100" (an
undocumented vessel; Transcoastal Marine Services, Inc. - reported owners)
while subject vessel was lying afloat in a laden condition and moored in
Venice, Louisiana, in order to ascertain the general condition and in order to
estimate her present day fair market value and orderly liquidation value as of
December 2, 1998.

NOTE: All sizes, measurements, distances, et cetera, mentioned herein are
approximate, unless otherwise specified.

GENERAL CONSTRUCTION PARTICULARS:

The vessel was built of all welded steel construction. Builder and date of
construction was unknown at the time of survey.

Dimensions are: Length - 110', breadth - 34', depth - 6'.

The vessel has a flush deck, a square raked bow, a square raked stern, and a
total of six (6) compartments consisting of one (1) bow rake compartment, four
(4) main body compartments, and one (1) stern rake compartment.

Access to each hull compartment is made through a manhole fitted with a center
bolt secured cover on a 4" high coaming. The No. 2 starboard main hull
compartment is used as a supply room.

The hull is fitted with two (2) strakes of formed plate rub rail which extends
from the bow to the stern on both port and starboard sides.
94

SURVEY REPORT NO. 9812-1221

GENERAL CONSTRUCTION PARTICULARS: (continued)

Deck fittings consists of the following:

One (1) 8" diameter cast steel double bitt is located near amidships.

Two (2) 30" cast steel kevels are ranged along both port and starboard sides.

One (1) 24" cast steel kevel is located on both port and starboard sides of
the bow.

One (1) 22" x 22" spudwell fitted atop a 36" coaming, is located on each
port and starboard sides near amidships. Starboard and port spudwell
each contain one (1) 18" x 18" x 40' spud.

One (1) 2-tier handrail, constructed of approximately 6" diameter pipe, is
located across the stern and on both port and starboard sides, extending
forward to spudwells.

CERTIFICATES/DOCUMENTS:

Subject vessel does not require regulatory bodies, certificates and/or
documents:

DECK EQUIPMENT:

Deck equipment consists of the following:

One (1) cutting torch set up.
One (1) triple drum winch powered by a General Motors 4-71 diesel engine.
One (1) American Amhoist, model 7750, 75 ton pedestal crane located on the
bow center line.
One (1) Miller portable welding machine
One (1) 2" pump
One (1) 2" Teel electric pump.
One (1) 40' long set of pile driving leads with 4,000 lb. drive hammer and
follow block.
One (1) 19' x 4' x 18" work pontoon.

TANK CAPACITIES:

Tank capacities are as follows:

Gas Tank...................200 gallons.
Diesel Tank................175 gallons.

QUARTERS BUILDING:

On the deck is one (1) quarter building, located from the stern, extending
forward to amidships. Arrangements are as follows:

SURVEY REPORT NO. 98112-1221

QUARTERS BUILDING: (continued)

Forward to port is a closet.

Aft to port is a crew's quarters with two (2) bunk beds and one (1) Fedders
window air-conditioning unit.

Aft to starboard is one (1) head containing three(3) sinks, two (2) showers,
two (2)commodes, and one (1) Sharp window air conditioning unit.

Aft to port is a storage closet.

Aft to port is a crew's quarters with five (5) triple bunks and one (1) Roper
and one (1) Sharp window air-conditioning units.

Aft to starboard is the galley/mess area which contains the following equipment
and/or furniture:

One (1) stove and oven.
One (1) Whirlpool refrigerator/freezer.
One (1) Amana refrigerator/freezer.
One (1) double stainless steel sink.
One (1) Sharp microwave.
One (1) Samsung TV.
One (1) JVC - VCR.
One (1) Standard Horizon VHF.
One (1) Pitney Bowes fax machine.
One (1) Scottsman ice maker.
One (1) cellular phone.
One (1) large chest-type Kenmore freezer.
Two (2) Carrier window air-conditioning units.
One (1) Roper window air-conditioning unit.

Atop the quarters is the following:

One (1) 30 KW generator powered by a Detroit Diesel 4-71 engine.
One (1) 15' flat boat with a 25 HP Evinrude outboard motor.

NO. 2 STARBOARD MAIN HULL COMPARTMENT:

This compartment is used as a supply room and contains the following:

Two (2) fresh water pumps.
One (1) Red Fox, model Hustler, serial No. 2940, sewer treatment plant.
96
SURVEY REPORT NO. 9812-1221

EXTERNAL CONDITION:

External coating of coal tar epoxy is in good condition.

Barge does not appear to have any significant corrosion, wastage, or major
indents.

INTERNAL CONDITION:

Internals are in good condition and appear to have a fair coating of Texaco
Compound H.

No significant damage or corrosion was sighted.

VALUATION:

Estimated present day fair market value
as of December 2, 1998.....................................$ 350,000.00

Fair Market Value:

A sum of money that a vessel should bring in competitive and open market
under all conditions requisite to a fair sale, the buyer and seller, each
acting prudently, knowledgeably, and assuming the price is not affected by
undue stimulus. Implicit in this definition is the consummation of a sale
where title is passed from seller to buyer under condition whereby:

1. The buyer and seller are typically motivated.

2. Both parties are well informed and acting in what they consider their
own best interest.

3. A reasonable time is allowed for exposure in the open market.

Estimated orderly liquidation value
as of December 2, 1998.........................................$ 275,000.00

The estimated gross amount expressed in terms of money which could be
typically realized from a sale, given a reasonable period of time to find a
purchaser(s), the seller being compelled to sell on an is-where is basis.

SURVEYOR'S NOTES:

All machinery and equipment aboard the barge appears to be in good condition
and well coated.

This vessel, as described herein, is in satisfactory condition for its intended
service.

97
SURVEY REPORT NO. 9812-1221

SURVEYOR'S NOTES: (continued)

This survey represents the good faith opinion of the surveyor only and does not
make any representations of fact. It was performed for insurance underwriting
and/or appraisal purposes only, and no warranty of correctness of this surveyor
as to the condition of seaworthiness; value, or marketability of subject
vessel is either expressed or implied.

The vessel was sighted afloat, without testing for tightness, hull gauging,
conducting sea trials, testing or trying out machinery or electrical
systems, or opening up any of those places ordinarily closed or concealed.
Therefore,deficiencies may exist other than those conditions noted in this
report.

The undersigned Marine Surveyor has no present or contemplated future interest
in the aforementioned vessel and/or its equipment, and compensation for services
has been arranged for on an independent fee basis and is in no way contingent
upon the value reported herein.

Survey made, signed, and submitted without prejudice to rights and/or interests
of whom it may concern.

Attending Surveyor:

Wade R. Olsen

BACHRACH, WOOD, PETERS & ASSOCIATES, INC.

[SEAL]
/s/ ANTHONY C. PETERS
--------------------------------------
Anthony C. Peters,
Principal Surveyor.

WRO:ktb

Distribution:

(2) Reports & (2) Invoices:
Bank One, Texas, NA
Attention: Ms. Karen S. Shouse
910 Travis Street, 7th Floor
TX-2 4260
Houston, Texas 77002

(Surveyor's Notes Continued Next Page)

98
SURVEY REPORT NO. 9812-1221

(1) Report:
Transcoastal Marine Services, Inc.
Attention: Mr. John Nowlin
183 Beadle Road
Lafayette, Louisiana 70508
99
[BACHRACH, WOOD, PETERS & ASSOCIATES, INC. LETTERHEAD]

December 11, 1998

Inspection - Ascertain
General Condition and
Fair Market Value
as of
November 30, 1998

SURVEY REPORT NO. 9811-1211

CRANE BARGE "ROWE 14"

THIS IS TO CERTIFY that the undernamed attending Marine Surveyor did on
November 30, 1998, at the request of Ms. Karen S. Shouse, on behalf of and for
the account of Bank One, Texas, NA, survey the steel crane barge "ROWE 14" (an
undocumented vessel of approximately 250 gross tons; Transcoastal Marine
Services, Inc. - reported owners The Woodson Companies - operators) while
subject vessel was lying afloat and moored at the facilities of the Woodson
companies at Delcambre, Louisiana, in order to ascertain the general condition
and in order to estimate her present day fair market value and orderly
liquidation value as of November 30, 1998.

Note: All sizes, measurements, distances, et cetera, mentioned herein are
approximate, unless otherwise specified.

GENERAL CONSTRUCTION PARTICULARS:

The vessel was built of all welded steel construction. Date and circumstance of
construction were unknown at the time of survey; however, the vessel appears to
be approximately twenty (20) years old.

Overall Dimensions are: Length - 110', breadth - 34', depth - 7.3'.

The vessel was designed for crane service, has a flush deck, square raked bow,
square transom stern, one (1) bow rake compartment, one (1) stern transom
compartment and thirteen (13) main hull compartments.

Access to each hull compartment is made via an 18" flush deck manhole with a
center bolt cover.
100

SURVEY REPORT NO. 9811-1211

GENERAL CONSTRUCTION PARTICULARS: (continued)

The vessel is fit with one (1) course of rub rail fender constructed of 18" x
3/8" formed plate which is located 2' below deck elevation and extends from bow
around the stern on both port and starboard sides, and is filled with concrete.

DECK FITTINGS:

Deck fittings are comprised of the following:

One (1) each approximately 6" double bitts located at each corner.
Two (2) each approximately 36" kevels are ranged down port and starboard sides.
One (1) each closed chocks located aft on both port and starboard sides.

The bow deck is fit with a single tier 36" high cargo railing constructed of 6"
diameter pipe with stanchions located on 12' centers.

Bottom, side and deck plating are estimated to have been 3/8" original
thickness.

The vessel is framed longitudinally and stiffened transversely. Longitudinal
bottom frames are 5" x 3" x 5/16" angle spaced on 25" centers. Longitudinal
side frames are 4" x 3" x 1/4" angle spaced on 24" centers. The vessel is
stiffened transversely with transverse trusses spaced on 7' centers. Top and
bottom chords are constructed of 10" channels and outboard chords are
constructed of 5" channels.

SPUD SYSTEM:

The vessel is fit with three (3) internal spudwells. Two (2) are located near
mid-length on port and starboard sides, and one (1) is located on forward
center line. The mid-length port and starboard spudwells are 22" square and the
forward center line spudwell is 33" square.

The vessel is fit with two (2) approximately 40' long 17" and 17" steel spuds,
and one (1) approximately 60' long 17" x 17" square steel spud.

Spuds are raised and lowered utilizing a three drum, single gypsy head spud
winch of unknown manufacturer driving. Spud winch is driven by a General
Motors, 4-cylinder, model 4-71 diesel engine through a torque converter and a
system of sprockets and gears.

DRAGLINE EQUIPMENT:

The vessel is designed for dredging utilizing a deck crawler crane with a
three-yard drag [ILLEGIBLE] bucket. The stern deck is fit with an approximately
20' x 20' x 12" high timber mat to distribute the crane load. Secured on the
timber mat is a crawler type crane.

101
SURVEY REPORT NO. 9811-1211

DRAGLINE EQUIPMENT: (continued)

The crane is a Bucyrus-Erie, model 71-B, series T, crawler crane in a dragline
configuration 100 with a 100' boom with a reported 70 tons of lifting capacity.
A General Motors, 12-cylinder, model V-12-71 diesel engine drives multiple
drums through a torque converter and a system of sprockets and chains.

DECKHOUSE ARRANGEMENT:

Located forward is a single level crew berthing area house which is constructed
of steel and is fit with portholes and designed watertight doors. The interior
is fit with overhead paneling, painted bulkheads, and linoleum floors.
Arrangements is as follows:

Forward, on the port side is a bunkroom with one (1) single double bunk, one
(1) General Electric 17 cu. ft. combination refrigerator/freezer, one (1)
clothes closet with a head and toilet, sink, and built in shower stall.

Forward, on the starboard side, is a bunkroom with three (3) double built in
wooden bunks and wooden storage closets.

A second bunkroom is located on the port side and contains two (2) double built
in wooden bunks and one (1) wooden clothes locker.

Located aft of the bunkroom on the port side is a head with one (1) double
built in shower stall, a toilet, and two (2) wooden storage lockers.

Located aft on the starboard side is a galley which contains a one hundred
(100) gallon electric water heater, a 4-element electric stove and oven, a
double stainless steel sink, and one (1) approximately 30 cu.ft. chest type
freezer, a mess table, and wooden dish racks and cabinets.

AUXILIARY EQUIPMENT:

In the lower hull is an auxiliary and storage room which contains one (1) 5 HP
electric motor driving a 2" fuel oil transfer pump and a fractional HP electric
motor driving a fresh water pressure set.

Located forward on the starboard side at main deck elevation of the house is a
generator room. The generator room contains one (1) 6-cylinder Cummins engine
driving a 75 KW/AC. The engine is electric starting and radiator cooled.

CERTIFICATES/DOCUMENTS:

No certification was on board the vessel at the time of survey.
102

SURVEY REPORT NO. 9811-1211

CONDITION:

The vessel was sighted afloat. Reportedly, the vessel was last hauled out during
May 1995. Poor housekeeping prevails. Poor preventative maintenance prevails.
Deck fittings appear in satisfactory condition.

The deck is open in way of hull vents for each compartment on both the port and
starboard sides. The vessel is not ready for service and is in need of cleaning
and major maintenance prior to human habitation.

The rub rail is heavily flattened at scattered locations and across the stern
and is fractured away from side plating forward on the port side. The main deck
bow cargo rail is broken away at two (2) locations and is heavily distorted at
the bow. Poor housekeeping prevails and the interior of the house is in poor
condition with all surfaces dirty and in need of maintenance.

Spudwells, where visible, show moderate wastage. Spuds, where visible, appear in
satisfactory condition. The spud winch appears in satisfactory condition. The
spud winch engine is reported in satisfactory condition but was not test
operated at time of survey.

The crane deck mats shows moderate dry rot. Crane securing is poor with heavy
wastage of connections. The crane tracks are heavily corroded and obviously
lack maintenance. The crane appears in good condition and undamaged and
reportedly major maintenance was performed in 1997. The crane appears disused
and lacks preventative maintenance. The forward windshield of the operators cab
is broken out and glass debris is on deck. An annual inspection for a 28,000
lb. capacity was completed May 26, 1998. The engine exhaust insulation is
adrift.

Crew berthing house doors are in poor condition and at several locations show
generous use of silicon caulking to cover waste holes. The interior of the
house is in disarray, dirty, and unkempt. Deterioration and unhealthy
conditions are at nearly every location. The port forward bunkroom is in
disarray. The associated head is in disarray with plumbing suspect. The after
head is in disarray and suffering the affects of disuse.

The forward starboard bunkroom is in poor condition with silicone caulk being
used for bulkhead cable runs. The forward spudwell is visible in a closet in
the house and is wasted through at a location 1' above main deck elevation and
this has been repaired with silicone caulk. Crew area wiring is in disarray and
circuits are open at scattered locations. The after bunkroom is being used for
storage and is in disarray.

The galley is unusable in its present condition.

Fire fighting equipment is in poor condition.

Life saving equipment is in poor condition.
103
SURVEY REPORT NO. 9811-1211

CONDITION: (continued)

The main generator appears to have been last maintained 3,000 hours ago and is
in need of preventative maintenance. Wiring in the generator room is improper
and open and the room is suffering from disuse.

The lower hull storage area is in poor condition and is unkempt.

Fuel oil transfer pump piping is in poor condition. The fresh water pressure set
appears inoperative and some wiring is open.

The hull exterior coating appears in satisfactory condition with moderate
pitting throughout. The interior of the hull is uncoated and in the lower
portion shows moderate rust scale and some internal members are wasted through
and fractured.

VALUATION:

Estimated present day fair market value
as of November 30, 1998.....................................$300,000.00

Fair Market Value:

A sum of money that a vessel should bring in a competitive and open
market under all conditions requisite to a fair sale, the buyer and
seller, each acting prudently, knowledgeably, and assuming the price is
not affected by undue stimulus. Implicit in this definition is the
consummation of a sale where title is passed from seller to buyer under
condition whereby:

1. The buyer and seller are typically motivated.

2. Both parties are well informed and acting in what they consider their
own best interest.

3. A reasonable time is allowed for exposure in the open market.

Estimated orderly liquidation value
as of November 30, 1998....................................$200,000.00

SURVEYOR'S NOTES:

The vessel was sighted afloat, without testing for tightness, hull gauging,
conducting sea trials, testing or tying out machinery or electrical systems, or
opening up any of those place ordinarily closed or concealed. Therefore,
deficiencies may exist other than those condition noted in this report.

The undersigned Marine Surveyor has no present or contemplated future interest
in th aforementioned vessel and/or its equipment, and compensation for services
has bee arranged for on an independent fee basis and is in no way contingent
upon the value reported herein.

Survey made, signed, and submitted without prejudice to rights and/or interests
of whom may concern.

Attending Surveyor:

John M. Swanson

BACHRACH, WOOD PETERS & ASSOCIATES, INC

[SEAL]

/s/ ANTHONY C. PETERS
-----------------------------------------
Anthony C. Peters,
Principal Surveyor.

SJB:smk
Distribution:

(2) Reports & (2) Invoices:
Bank One, Texas, NA
Attention: Ms. Karen S. Shouse
910 Travis Street, 7th Floor
TX-2 4260
Houston, Texas 77002
105
SURVEY REPORT NO. 9811-1211

DISTRIBUTION: (continued)

(1) Report:
Transcoastal Marine Services, Inc.
Attention: Mr. John Nowlin
183 Beadle Road
Lafayette, Louisiana 70508
106
[BACHRACH, WOOD, PETERS & ASSOCIATES, INC. LETTERHEAD]

December 11, 1998

Inspection - Ascertain
General Condition and
Fair Market Value
as of
December 4, 1998

SURVEY REPORT NO. 9812-1223

CONSTRUCTION BARGE
250'x50'x12'

THIS IS TO CERTIFY that the undernamed attending Marine Surveyor did on December
4, 1998, at the request of Ms. Karen S. Shouse, on behalf of and for the
account of Bank One, Texas, NA, survey the 250' construction barge (an
undocumented vessel; Transcoastal Marine Services, Inc. - reported owners) while
subject vessel was lying afloat in an unladen condition and moored at the
facilities of Red Fox on Industrial Canal in New Orleans, Louisiana, in order to
ascertain the general condition and in order to estimate her present day fair
market value and orderly liquidation value as of December 4, 1998.

Note: All sizes, measurements, distances, et cetera, mentioned herein are
approximate, unless otherwise specified.

GENERAL CONSTRUCTION PARTICULARS:

The vessel was built of all welded steel construction by Nashville Bridge
Company in Nashville, Tennessee during 1953.

Dimensions are: Length - 250', breadth - 50', depth - 12'.

The vessel has a cambered deck with a dead rise in way of the bow rake and No. 1
main compartments, a spoon raked bow, a transom stern, and a total of ten (10)
compartments consisting of one (1) bow rake compartment, eight (8) main body
compartments, and one (1) stern transom compartment.

Access to each hull compartment is made through a 21"x16" oval deck type
manhole on 3-1/2" raised coaming fitted with a 4-dog secured cover.
107
SURVEY REPORT NO. 9812-1223

GENERAL CONSTRUCTION PARTICULARS: (continued)

The hull is fitted with two (2) strakes of 9" split pipe rub rail, located at
4-1/2' and 10' elevations which extend from the bow to the stern on both port
and starboard sides. A 7" x 3/4" rub bar is located 1' below the deck on both
port and starboard sides. Additionally, twenty-two (22) large truck tires
suspended by heavy chain from double padeyes are ranged along the port side.

Forward half of the deck is fitted with a 1-1/4" diameter 2-tier pipe handrail.
After half of the deck is fitted with a 2-tier handrail fabricated of 3" x 3"
angle and 1/4" wire rope.

Deck fittings consists of the following:

One (1) 48" cast steel kevels is located on bow and stern center line.
Five (5) 48" cast steel kevels are ranged along both the starboard side.
Two (2) 48" cast steel kevels are ranged along the port side.
Three (3) 36" cast steel kevels are ranged along the port side.
One (1) 60" cast steel kevel is on port side.
One (1) 10" button bitt is located on the port side forward.
One (1) 8" single bitt is located to both port and starboard of amidship.
One (1) 12" double steel bitt is located at each corner of the stern.
Two (2) 10" button bitts, two (2) 12" button bitts, and one (1) 10" roller
button bitt are located at the port stern corner.
Three (3) 10" button bitts and two (2) 12" button bitts are located at the
starboard stern corner.
Two (2) 24" diameter spudwells fitted atop 5" coamings are located on the
starboard side. Each contains one (1) 42' spud.
Two (2) 16" x 16" spudwells fitted atop 8" coamings are located on the
starboard side. Each contains one (1) 16" diameter x 42' spud.

CERTIFICATES/DOCUMENTS:

Subject vessel does not require regulatory bodies, certificates and/or
documents.

DECK EQUIPMENT:

Deck equipment consists of the following:

One (1) hand operated single drum winch.
One (1) American, model No. 9720, serial No. 658720, 90 ton crane is mounted on
a 16' x 15' x 14' pedestal.

108
SURVEY REPORT NO. 9812-1223

DECK ARRANGEMENT:

Deck consists of three(3) construction decks, one (1) pedestal crane, and a
metal storage building.

Arrangement is as follows:

Forward to starboard is a 15' x 40' x 10' metal storage building. In the after
end of the building, a stairway leads down to additional storage in No. 1 port
and starboard main compartments. Access to the port main compartment is through
a 5' x 7' opening in the longitudinal bulkhead. Building does not use
watertight doors.

Aft on center line is a 10' x 40" diameter boom rest fitted with gusset plates.

Aft is a 36' x 50' x 12" cement deck. Atop the Cement deck is a 36' x 20' x 16"
construction fabricated of 9" channel and 4" x 3" angle.

Aft is a 36' x 40' x 26" steel construction deck fabricated of 16" I-beam and
3" x 3" angle.

Aft is the pedestal crane.

At the stern is a 60' x 40' x 26" steel construction deck fabricated of 15"
channel, 16" I-beam, and 4" x 3" angle.

ELECTRICAL:

The vessel is wired with a combination of basket weave metal armored type
cable, galvanized flexible conduit, and PVC insulated cable. Lighting system is
110 volt AC. Overload protection is via circuit breakers. Electricity is
provided by shore power.

EXTERNAL CONDITION:

External coating of coal tar epoxy is in excellent condition in way of sides,
transom, and bow rake.

Deck coating is in fair condition.

Starboard side plating contains washboarding and numerous indents of 0 to 3".

Starboard rub rail appears recently renewed in most areas.

Reportedly, bottom plating has its anodes renewed.

Port side plating contains washboarding and large diameter indents of 0 to 5".
109
SURVEY REPORT NO. 9812-1223

EXTERNAL CONDITION: (condition)

All tires and chains have recently been renewed on the port side.

Transom plating set in and washboarded 0 to 5" over its full breadth and width.

Side plating, gunwale, and deck contain numerous doublers throughout.

Most wire rope handrails have wires adrift with three (3) 10' sections missing
wires and posts.

Pipe handrail is in good condition.

Deck plating contains washboarding of 0 to 2" in a few areas.

After work deck is uncoated and in good condition.

All other work decks are recently coated and in good condition.

Crane pedestal is in like-new condition.

All deck fittings and manholes have been recently coated with yellow epoxy.

Numerous manholes have their coamings cropped off and covers replaced with
steel plating not fitted with gaskets.

INTERNAL CONDITION:

Internals are in fair condition with a coating of silver paint in way of the
upper 10', mostly intact. Lower 2' displays mild to moderate corrosion.

Numerous internal stiffeners were distorted to conform to external distortion.

VALUATION:

Estimated present day fair market value
as of December 4, 1998.......................................$ 300,000.00

Fair Market Value:

A sum of money that a vessel should bring in a competitive and open market
under all conditions requisite to a fair sale, the buyer and seller, each
acting prudently knowledgeably, and assuming the price is not affected by
undue stimulus. Implicit of this definition is the consummation of a sale
where title is passed from seller to buyer under condition whereby:

110
SURVEY REPORT NO. 9812-1223

VALUATION: (continued)

1. The buyer and seller are typically motivated.

2. Both parties are well informed and acting in what they consider their
own best interest.

3. A reasonable time is allowed for exposure in the open market.

Estimated orderly liquidation value
as of December 4, 1998.......................................$200,000.00

The estimated gross amount expressed in terms of money which could be
typically realized from a sale, given a reasonable period of time to find a
purchaser(s), the seller being compelled to sell on an is-where is basis.

SURVEYOR'S NOTES:

All machinery and equipment aboard the barge appears to be in good condition
and well coated.

This vessel, as described herein, is in satisfactory condition for its intended
service.

The vessel was sighted afloat, without testing for tightness, hull gauging,
conducting sea trials, testing or trying out machinery or electrical systems,
or opening up any of those places ordinarily closed or concealed. Therefore,
deficiencies may exist other than those conditions noted in this report.

The undersigned Marine Surveyor has no present or contemplated future interest
in the aforementioned vessel and/or its equipment, and compensation for
services has been arranged for on an independent fee basis and is in no way
contingent upon the values reported herein.

Survey made, signed, and submitted without prejudice to rights and/or interests
of whom it may concern.

Attending Surveyor:

Joseph L. Aveton
111
SURVEY REPORT NO. 9812-1223

SURVEYOR'S NOTES: (continued)

BACHRACH, WOOD, PETERS & ASSOCIATES, INC.

[SEAL]

/s/ ANTHONY C. PETERS
----------------------------------------
Anthony C. Peters,
Principal Surveyor.

JLA:ktb

Distribution:

(2) Reports & (2) Invoices:
Bank One, Texas, NA
Attention: Ms. Karen S. Shouse
910 Travis Street, 7th Floor
TX-2 4260
Houston, Texas 77002

(1) Report:
Transcoastal Marine Services, Inc.
Attention: Mr. John Nowlin
183 Beadle Road
Lafayette, Louisiana 70508

112
[BACHRACH, WOOD, PETERS, & ASSOCIATES, INC. LETTERHEAD]

December 07, 1998

Inspection - Ascertain
General Condition and
Fair Market Value
as of
November 30, 1998

SURVEY REPORT NO. 9811-1213

SPUD BARGE "7101"

THIS IS TO CERTIFY that the undernamed attending Marine Surveyor did on November
30, 1998, at the request of Ms. Karen S. Shouse, and on behalf of and for the
account of Bank One, Texas, NA, survey the undocumented steel Spud Barge "7101",
the Ex-NBC 1857, a vessel of approximately 315 gross tons; reported owners
Transcoastal Marine Services, Inc. - operators The Woodson Companies - while
subject vessel lay afloat and moored in an unladened condition at the facilities
of The Woodson Companies at Delcambre, Louisiana, in order to ascertain the
general condition of the vessel and in order to estimate her present day fair
market value and orderly liquidation values as of November 30, 1998.

Note: All sizes, measurements, distances, et cetera, mentioned herein are
approximate, unless otherwise specified.

GENERAL CONSTRUCTION PARTICULARS:

The vessel was built of all welded steel construction by Nashville Bridge
Company at Nashville, Tennessee, during 1966.

Overall dimensions are: Length - 136', breadth - 35', depth - 7'6".

This vessel is designed for crane service, has a flush deck, a square raked
bow, a square raked stern, three (3) bow rake compartments, four (4) main body
compartments, and one (1) stern rake compartment.

Access to each hull compartment is made via an 18" flush deck manhole with
a center bolt cover.

The vessel is not fit with rub rail fenders.

113
SURVEY REPORT NO. 9811-1213

GENERAL CONSTRUCTION PARTICULARS: (continued)

The hull of the vessel is constructed with a 3/4" thick headlog, 3/4" rake
knuckles, 1/2" thick deck, 3/8" thick sides and bottom plating, 3/8" rake bottom
plating and 5/16" thick bulkheads. The vessel is longitudinally framed and
transversely stiffened. Longitudinal deck beams approximately 5" channels spaced
on 11" centers. Longitudinal side frames are 5" x 3" x 5/16" inch angles spaced
on 25" centers. Longitudinal bottom frames are 5" x 3" x 3/8" angles spaced on
23" centers.

The hull is stiffened transversely with transverse trusses spaced on 72"
centers. Top and bottom cords are 15" "I" beams. Outboard cords 14" "I" beams.
Trusses are stiffened with 12" "I" beam verticals spaced on 4 ft. centers and
with inboard and outboard diagonals of 5" "I" beams. Bulkheads are stiffened
with 5" x 5/16" flatbars spaced on 24" centers.

Deck fittings consist of:

One (1) each approximately 6" double bitts located on each barge corner and
three (3) each approximately 42" kevels ranged down both port and starboard
sides.

The vessel is fitted with one (1) each approximately 6" diameter x 6" high
compartment pump-out pipes with caps located in way of the port and starboard
bow rake compartments.

The vessel is fitted with approximately 6" high steel pollution barrier fit with
2 1/2" drains with plugs which is constructed of approximately drains with plugs
which is constructed of approximately 1/4" thick steel and extends around the
entire periphery of the deck edge.

Port and starboard sides are each fit with an approximately 44" high two tier
safety hand rail constructed of 4" diameter pipe stanchions and two courses of
3/8" wire cable.

Forward and aft on the starboard side are a total of two (2) internal spud
wells. Each spud well is fit with sheaves and fairlead blocks to the spud winch
which is located forward on the starboard side. The spud winch is skid mounted,
double drum, double gypsy head Conmaco winch driven by General Motors,
4-cylinder model 4-71 diesel engine. The engine is electric starting and
radiator cooled. The winch is additionally fit with a 12 volt battery and
approximately 50 gallon capacity diesel oil tank.

The vessel is fit with a total of two (2) approximately 40 ft. long, 21" x 21"
square steel spuds.

The area over the spud winch is fit with a 20 ft. x 8 ft. x 12 ft. steel
platform constructed of 6" diameter pipe stanchions and 8" "H" beam frames. The
top of the platform is fit with a 36" high two tier pipe safety hand rail.

The starboard side #1 main body compartment is fit with a steel access trunk
with a weather tight steel door.
114
SURVEY REPORT NO. 9811-1213

GENERAL CONSTRUCTION PARTICULARS: (continued)

The vessel has on board two (2) 30" ring buoys with throw lines and water lights
and one (1) 15 lb. portable CO(2) fire extinguisher which was last date tagged
during January 1998.

CERTIFICATES/DOCUMENTS:

No documents were on board the vessel at time of survey.

CONDITION:

The vessel was sighted afloat. Reportedly the vessel was last hauled out during
July, 1998. Head log plating is devoid of indents. Bow rake bottom plating was
inaccessible at time of survey, however, an internal examination showed no major
upsets at any location. Starboard side plating and rake knuckle and deck edge
show minor indents of 0 to 2" in the forward 12 ft. portion. Starboard side
plating is generally wavy to a depth of 0 to 1" throughout with very occasional
major indents of 0 to 2". Stern log plating is devoid of indents. Stern rake
bottom plating is devoid of upsets. Port side plating showed numerous minor
indents of 0 to 1" at random locations. No noteworthy damage was found
internally. No noteworthy wastage was sighted at any location and the vessel is
well coated internally and externally. The pollution barrier is open at some
locations. Hand rails have been partially dismantled. The spud winch appears in
excellent condition and was reportedly recently rebuilt. The date of rebuilding
was unknown at the time of survey and the spud winch was not test operated at
time of survey.

VALUATION:

Estimated present day fair market value
as of November 30, 1998........................................ $285,000.00

Fair Market Value:

A sum of money that a vessel should bring in a competitive and open market
under all conditions requisite to a fair sale, the buyer and seller, each
acting prudently, knowledgeably, and assuming the price is not affected by
undue stimulus. Implicit in this definition is the consummation of a sale
where title is passed from seller to buyer under condition whereby:

1. The buyer and seller are typically motivated.

2. Both parties are well informed and acting in what they consider their
own best interest.

3. A reasonable time is allowed for exposure in the open market.

115
SURVEY REPORT NO. 9811-1213

VALUATION: (continued)

Estimated orderly liquidation value
as of November 30, 1998.........................................$255,000.00

The estimated gross amount expressed in terms of money which could be
typically realized from a sale, given a reasonable period of time to find a
purchaser(s), the seller being compelled to sell on an is-where is basis.

SURVEYOR'S NOTES:

All machinery and equipment aboard the barge appears to be in good condition
and well coated.

This survey represents the good faith opinion of the surveyor only and does
not make any representations of fact. It was performed for insurance
underwriting and/or appraisal purposes only, and no warranty of
correctness of this surveyor as to the condition, seaworthiness, value, or
marketability of subject vessel is either expressed or implied.

The vessel was sighted afloat, without testing for tightness, hull gauging,
conducting sea trials, testing or trying out machinery or electrical systems,
or opening up any of those places ordinarily closed or concealed. Therefore,
deficiencies may exist other than those conditions noted in this report.

The undersigned Marine Surveyor has no present or contemplated future interest
in the aforementioned vessel and/or its equipment, and compensation for
services has been arranged for an independent fee basis and is in no way
contingent upon the values reported herein.

Survey made, signed, and submitted without prejudice to rights and/or interests
of whom it may concern.

Attending Surveyor:

John M. Swanson

BACHRACH, WOOD, PETERS & ASSOCIATES, INC.

[SEAL]

/s/ ANTHONY C. PETERS
----------------------------------------
Anthony C. Peters,
Principal Surveyor.

116
SURVEY REPORT NO. 9811-1213

SURVEYOR'S NOTES: (continued)

JMS:maw

Distribution:

(2) Reports & (2) Invoices:
Bank One, Texas, NA
Attention: Ms. Karen S. Shouse
910 Travis Street, 7th Floor
TX-2 4260
Houston, Texas 77002

(1) Report:
Transcoastal Marine Services, Inc.
Attention: Mr. John Nowlin
183 Beadle Road
Lafayette, Louisiana 70508

117
[BACHRACH, WOOD, PETERS, & ASSOCIATES, INC. LETTERHEAD]

December 8, 1998

Inspection - Ascertain
General Condition and
Fair Market Value
as of
November 30, 1998

SURVEY REPORT NO. 9811-1214

SPUD BARGE "7102"

THIS IS TO CERTIFY that the undernamed attending Marine Surveyor did on
November 30, 1998, at the request of Ms. Karen S. Shouse, and on behalf of and
for the account of Bank One, Texas, NA, survey the undocumented steel Spud
Barge "7102", the ex-"NBC 1856, a vessel of approximately 315 gross tons;
reported owners Transcoastal Marine Services, Inc. - operators The Woodson
Companies - while subject vessel lay afloat and moored in an unladened
condition at the facilities of The Woodson Companies at Delcambre, Louisiana,
in order to ascertain the general condition of the vessel and in order to
estimate her present day fair market value and orderly liquidation values as of
November 30, 1998.

Note: All sizes, measurements, distances, et cetera, mentioned herein are
approximate, unless otherwise specified.

GENERAL CONSTRUCTION PARTICULARS:

The vessel was built of all welded steel construction by Nashville Bridge
Company at Nashville, Tennessee, during 1966.

Overall dimensions are: Length - 136', breadth - 35', depth - 7'6".

Access to each hull compartment is made via made an 18" flush deck manhole with
a center to a cover.

The vessel is not fit with rub rail fenders.

118
SURVEY REPORT NO. 9811-1124

GENERAL CONSTRUCTION PARTICULARS: (continued)

The hull of the vessel is constructed with a 3/4" thick headlog, 3/4" rake
knuckles, 1/2" thick deck, 3/8" thick sides and bottom plating, 3/8" rake
bottom plating and 5/16" thick bulkheads. The vessel is longitudinally framed
and transversely stiffened. Longitudinal deck beams approximately 5" channels
spaced on 11" centers. Longitudinal side frames are 5" x 3" x 5/16" inch angles
spaced on 25" centers. Longitudinal bottom frames are 5" x 3" x 3/8" angles
spaced on 23" centers.

One(1) each approximately 6" double bitts located on each barge corner and
three(3) each approximately 42" kevels ranged down both port and starboard
sides.

The vessel is fitted with one (1) each approximately 6" diameter x 6" high
compartment pump-out pipes with caps located in way of the port and starboard
bow rake compartments.

The vessel is fitted with approximately 6" high steel pollution barrier fit with
2 1/2" drains with plugs which is constructed of approximately 1/4" thick steel
and extends around the entire periphery of the deck edge.

Port and starboard sides are each fit with an approximately 44" high two tier
safety hand rail constructed of 4" diameter pipe stanchions and two courses of
3/8" wire cable.

Forward and aft on the starboard side are a total of two (2) internal spud
wells. Each spud well is fit with sheaves and fairlead blocks to the spud winch
which is located forward on the starboard side. The spud winch is a skid
mounted, triple drum, double gypsy head Conmaco winch driven by General Motors,
4-cylinder model 4-71 diesel engine with a local control station. The engine is
electric starting and radiator cooled. The winch is additionally fit with a 12
volt battery and approximately 50 gallon capacity diesel oil tank.

The vessel is fit with a total of two (2) approximately 40 ft. long, 21" x 21"
square steel spuds.

The starboard side #1 main body compartment is fit with a steel access trunk
with a weather tight steel door.
119
SURVEY REPORT NO. 9811-1124

GENERAL CONSTRUCTION PARTICULARS: (continued)

The vessel has on board two (2) 30" ring buoys with throw lines and water lights
and one (1) 15 lb. portable CO(2) fire extinguisher which was last date tagged
during January 1998.

CERTIFICATES/DOCUMENTS:

No documents were on board the vessel at time of survey.

CONDITION:

The vessel was sighted afloat. Reportedly the vessel was last hauled out
during July, 1998. Head log plating is devoid of notable indents. Bow rake
bottom plating is devoid of indents. Starboard side plating shows numerous
minor indents of 0-1" throughout. Starboard side plating is set in 0-4" over an
area of 15' X full depth of vessel, near mid-length. Sternlog plating is devoid
of major indents. Stern rake bottom plating is devoid of indents. Port side
plating shows numerous minor indents of 0-1" at scattered locations and several
sharp minor indents of 0-3". Port bow rake knuckle plating and port side
plating set in 0-6" over 6' x 2' located in way of the port bow double bitts.
No noteworthy damage was found internally. No noteworthy wastage was sighted
at any location and the vessel is well coated internally and externally. The
pollution barrier is open at some locations. Hand rails have been partially
dismantled. The spud winch appears in excellent condition and was reportedly
recently rebuilt. The date of rebuilding was unknown at the time of survey and
the spud winch was not test operated at time of survey.

VALUATION:

Estimated present day fair market value
as of November 30, 1998........................................ $280,000.00

Fair Market Value:

A sum of money that a vessel should bring in a competitive and open market
under all conditions requisite to a fair sale, the buyer and seller, each
acting prudently, knowledgeably, and assuming the price is not affected by
undue stimulus. Implicit in this definition is the consummation of a sale
where title is passed from seller to buyer under condition whereby:

1. The buyer and seller are typically motivated.

2. Both parties are well informed and acting in what they consider their
own best interest.

3. A reasonable time is allowed for exposure in the open market.

120
SURVEY REPORT NO. 9811-1124

VALUATION: (continued)

Estimated orderly liquidation value
as of November 30, 1998.........................................$250,000.00

The estimated gross amount expressed in terms of money which could be
typically realized from a sale, given a reasonable period of time to find a
purchaser(s), the seller being compelled to sell on an is-where is basis.

SURVEYOR'S NOTES:

All machinery and equipment aboard the barge appears to be in good condition
and well coated.

This survey represents the good faith opinion of the surveyor only and does
not make any representations of fact. It was performed for insurance
underwriting and/or appraisal purposes only, and no warranty of
correctness of this surveyor as to the condition, seaworthiness, value, or
marketability of subject vessel is either expressed or implied.

The vessel was sighted afloat, without testing for tightness, hull gauging,
conducting sea trials, testing or trying out machinery or electrical systems,
or opening up any of those places ordinarily closed or concealed. Therefore,
deficiencies may exist other than those conditions noted in this report.

The undersigned Marine Surveyor has no present or contemplated future interest
in the aforementioned vessel and/or its equipment, and compensation for
services has been arranged for on an independent fee basis and is no way
contingent upon the values reported herein.

Survey made, signed, and submitted without prejudice to rights and/or interests
of whom it may concern.

Attending Surveyor:

John M. Swanson

BACHRACH, WOOD, PETERS & ASSOCIATES, INC.

[SEAL]

/s/ ANTHONY C. PETERS
-----------------------------------------
Anthony C. Peters,
Principal Surveyor.

JMS:maw
121

Distribution: (continued from previous page)

(2) Reports & (2) Invoices:
Bank One, Texas, NA
Attention: Ms. Karen S. Shouse
910 Travis Street, 7th Floor
TX-2 4260
Houston, Texas 77002

(1) Report:
Transcoastal Marine Services, Inc.
Attention: Mr. John Nowlin
183 Beadle Road
Lafayette, Louisiana 70508

122
[BACHRACH, WOOD, PETERS & ASSOCIATES, INC. LETTERHEAD]

December 11, 1998

Inspection - Ascertain
General Condition and
Fair Market Value
as of
December 4, 1998

SURVEY REPORT NO. 9812-1224

OFFICE BARGE
208' x 26' x 5'

THIS IS TO CERTIFY that the undernamed attending Marine Surveyor did on
December 4, 1998, at the request of Ms. Karen S. Shouse, on behalf of and for
the account of Bank One, Texas, NA, survey the 208' office barge (an
undocumented vessel; Transcoastal Marine Services, Inc. - reported owners)
while subject vessel was lying afloat in an unladen condition and moored at the
facilities of Red Fox on Industrial Canal in New Orleans, Louisiana, in order
to ascertain the general condition and in order to estimate her present day
fair market value and orderly liquidation value as of December 4, 1998.

Note: All sizes, measurements, distances, et cetera, mentioned herein are
approximate, unless otherwise specified.

GENERAL CONSTRUCTION PARTICULARS:

The vessels were built of all welded steel construction by Nashville Bridge
Company in Nashville, Tennessee. The forward vessel was built in 1941, hull No.
579. The after vessel was built in 1955, hull No. 1134.

Overall dimensions are: Length - 208', breadth - 26', depth - 5'.

The vessel consists of two (2) barges bolted together stern to stern. Forward
vessel has a flush deck, a square raked bow, a square raked stern, and a total
of five (5) compartments consisting of one (1) bow rake compartment, three (3)
main body compartments, and one (1) stern rake compartment. The after vessel
has a flush deck, a square raked bow, a transom stern and a total of three (3)
compartments consisting of one (1) port main compartment and two (2) starboard
main compartments.
123
SURVEY REPORT NO. 9812-1224

GENERAL CONSTRUCTION PARTICULARS: (continued)

Access to each hull compartment is made through various design 18" to 20"
diameter deck type manholes.

Forward hull is fitted with one (1) strake of 15" formed plate rub rail,
located just below the deck which extends from the bow to the stern on both port
and starboard sides. After hull is fitted with a 7" x 3/4" rub bar located just
below the deck which extends from the bow to the stern on the port side.
Starboard side has no fender system.

Port deck gunnel is fitted with a 3" diameter 1-tier pipe guardrail with 3"
diameter vertical stanchions 9" high which extend from the bow to the stern.

Deck fittings consists of the following:

Eleven (11) 7" diameter steel H bitts are ranged along the port side.
One (1) 36" cast steel kevel is located on the stern center line.
One (1) 48" cast steel kevel is located at the starboard stern corner.
Three (3) 14" diameter spudwells are surface mounted to the starboard side.
Each contains one (1) spud.

CERTIFICATES/DOCUMENTS:

Subject vessel does not require regulatory bodies, certificates and/or
documents.

DECK EQUIPMENT:

Deck equipment consists of the following:

Three (3) Nabrico 40 single drum electric winches.
One (1) Woods 20 cubic foot freezer.
One (1) Oasis water fountain.
Three (1) 5' x 46" x 30 Knaack toolboxes.

DECK ARRANGEMENTS:

Deck contains two (2) single level steel buildings located on the forward barge
and one (1) two level steel building located on the after barge.

Arrangement is as follows:

At the bow is one (1) 18' x 7'6" building used for storage of personnel
equipment and as a break area.
124
SURVEY REPORT NO. 9812-1224

DECK ARRANGEMENTS:

Aft is a 40' x 18' building containing a pipe fabrication shop. In the center
is a 4' x 15' steel work table. At various locations in the building are
stations for connections to air, oxygen, argon, propane, and water. All
connections are color coded. All gases and water are supplied from shore. Pipe
shop also contains fourteen (14) 2000 lb. jack stands and one (1) 6" vice.

Aft is a breezeway. A trolley system consisting of a 8" I-beam suspended
overhead is used for loading equipment from the starboard side to a tool room
located aft.

Aft is a 40' x 18' building used as a company tool room. This building contains
the following:

Drop lights. Torches. Life jackets.
Hand tools. Grinders. Safety Equipment.
Circular saws. Ladders. Fire extinguishers.
Come-alongs. Bilge pumps. Welding equipment.
Paint brushes. Battery chargers. Welding rods.
Nuts, bolts, and washers.

Aft is a 70' x 21' building used for storage of electrical and welding
equipment. This building contains eight (8) Thermal ARC electric welding
machines, one (1) General Electric refrigerator, two (2) 1-3/4" diameter
pneumatic pumps, and various extension cords, high pressure hoses, and rope.

Second level in the after building is used for office space that measures 35' x
50'. Equipment in the office area consists of the following:

One (1) Ricoh, model FT4727, copy machine.
One (1) Hotpoint refrigerator.
One (1) Panasonic fax machine/copier.
Six (6) Kenwood VHF marine hand held radios with chargers.
Four (4) Standard VHF marine hand held radios with chargers.
One (1) Daytron microwave oven.
One (1) Magic Chef toaster oven.
One (1) Mr. Coffee coffeemaker.

At the after end of the building is a head with five (5) commodes.

ELECTRICAL:

Vessel is wired with basketweave metal armored type cable. Lighting system is
110 volt AC. Overload protection is via circuit breakers. Electricity is
provided by shore power.
125
SURVEY REPORT NO. 9812-1224

EXTERNAL CONDITION:

External coating of coal tar epoxy is in good condition.

Deck coating of red epoxy is in good condition.

Perimeter of the deck and the deck fittings are well coated with yellow epoxy.

All buildings are fabricated of 1/4" plate and their internal and external
coating is in good condition.

Barge contains light washboarding and few indents of 0 to 1" throughout.

Reportedly, bottom plating has had its anodes recently renewed.

INTERNAL CONDITION:

Internals are in good to fair condition, with no coating evident and light
corrosion throughout.

No significant damage was sighted.

VALUATION:

Estimated present day fair market value
as of December 4, 1998..................................$210,000.00

Fair Market Value:

A sum of money that a vessel should bring in a competitive and open market
under all conditions requisite to a fair sale, the buyer and seller, each
acting prudently, knowledgeably, and assuming the price is not affected by
undue stimulus. Implicit in this definition is the consummation of a sale
where title is passed from seller to buyer under condition whereby:

1. The buyer and seller are typically motivated.

2. Both parties are well informed and acting in what they consider their
own best interest.

3. A reasonable time is allowed for exposure in the open market.
126
SURVEY REPORT NO. 9812-1224

VALUATION: (continued)

Estimated orderly liquidation value
as of December 4, 1998...................................$140,000.00

The estimated gross amount expressed in terms of money which could be
typically realized from a sale, given a reasonable period of time to find a
purchaser(s), the seller being compelled to sell on an is-where is basis.

SURVEYOR'S NOTES:

All machinery and equipment aboard the barge appears to be in good condition
and well coated.

This vessel, as described herein, is in satisfactory condition for its intended
service.

The vessel was sighted afloat, without testing for tightness, hull gauging,
conducting sea trials, testing or trying out machinery or electrical systems,
or opening up any of those places ordinarily closed or concealed. Therefore,
deficiencies may exist other than those conditions noted in this report.

The undersigned Marine Surveyor has no present or contemplated future interest
in the aforementioned vessel and/or its equipment, and compensation for
services has been arranged for on an independent fee basis and is in no way
contingent upon the values reported herein.

Survey made, signed, and submitted without prejudice to rights and/or interests
of whom it may concern.

Attending Surveyor:

Joseph L. Aveton
127
SURVEY REPORT NO. 9812-1224

SURVEYOR'S NOTES: (continued)

BACHRACH, WOOD, PETERS & ASSOCIATES, INC.

[SEAL]

/s/ ANTHONY C. PETERS
-----------------------------------------
Anthony C. Peters,
Principal Surveyor.

JLA:ktb

Distribution:

(2) Reports & (2) Invoices:
Bank One, Texas, NA
Attention: Ms. Karen S. Shouse
910 Travis Street, 7th Floor
TX-2 4260
Houston, Texas 77002

(1) Report:
Transcoastal Marine Services, Inc.
Attention: Mr. John Nowlin
183 Beadle Road
Lafayette, Louisiana 70508
128
[BACHRACH, WOOD, PETERS & ASSOCIATES, INC. LETTERHEAD]

December 11, 1998

Inspection - Ascertain
General Condition and
Fair Market Value
as of
December 4, 1998

SURVEY REPORT NO. 9812-1222

SPUD BARGE "TCMS 612"

THIS IS TO CERTIFY that the undernamed attending Marine Surveyor did on
December 4, 1998, at the request of Ms. Karen S. Shouse, on behalf of and for
the account of Bank One Texas, NA, survey the spud barge "TCMS 612" (an
undocumented vessel, of 401 gross and net tons; Transcoastal Marine Services,
Inc. - reported owners) while subject vessel was lying afloat in a laden
condition and moored at the facilities of Coastal Machinery in Belle Chasse,
Louisiana, in order to ascertain the general condition and in order to estimate
her present day fair market value and orderly liquidation value as of December
4, 1998.

Note: All sizes, measurements, distances, et cetera, mentioned herein are
approximate, unless otherwise specified.

GENERAL CONSTRUCTION PARTICULARS:

The vessel was built of all welded steel construction. Builder and date of
construction was unknown at time of survey.

Dimensions are: Length - 140', breadth - 39', depth - 9'.

The vessel has a flush deck, a square raked bow, a square raked stern, and a
total of eight (8) compartments consisting of two (2) bow rake compartments,
four (4) main body compartments, and two (2) stern rake compartments.

Access to each hull compartment is made through both flush deck type 18"
diameter manholes fitted with a center bolt secured covers.

The hull is fitted with two (2) strakes of formed plate rub rail located at the
3' and [ILLEGIBLE] elevations which extend from the bow to the stern on both
port and starboard sides [ILLEGIBLE] interim vertical strakes at strategic
locations.
129
SURVEY REPORT NO. 9812-1222

GENERAL CONSTRUCTION PARTICULARS: (continued)

Approximately 60% of the deck is laid out with timbers.

Deck fittings consists of the following:

One (1) 10" diameter cast steel double bitt is located in way of each corner of
the barge hull.
Two (2) 36" cast steel kevels are located on the starboard side.
Three (3) 36" cast steel kevels are located on the port side.
Two (2) 21" diameter spudwells fitted atop an 18" coamings, are located forward
and aft on the starboard side. Each contains one (1) 40' spud.
Two (2) davits for spuds, each approximately 40' high.

CERTIFICATES/DOCUMENTS:

Subject vessel does not require regulatory bodies, certificates and/or
documents.

EXTERNAL CONDITION:

External coating of coal tar epoxy is in good condition.

Barge does not appear to have any significant corrosion or wastage.

Hull contains random washboarding and indents of 0 to 1-1/2".

Deck plating contains random washboarding and indents of 0 to 1-1/2" where
sighted.

Reportedly, bilge knuckles have been renewed on both port and starboard sides
for the full length.

Reportedly, 8' of bottom plating has been renewed.

Reportedly, bow and stern rake compartments have been cleaned and recoated.

Reportedly, anodes have been renewed.

INTERNAL CONDITION:

Internals are in good condition and appear to have a fair coating of Texaco
Compound H.

No significant damage or corrosion was sighted.

130
SURVEY REPORT NO. 9812-1222

VALUATION:

ESTIMATED PRESENT DAY FAIR MARKET VALUE
AS OF DECEMBER 4, 1998.........................................$ 200,000.00

Fair Market Value:

A sum of money that a vessel should bring in a competitive and open market
under all conditions requisite to a fair sale, the buyer and seller, each
acting prudently knowledgeably, and assuming the price is not affected by
undue stimulus. Implicit in this definition is the consummation of a sale
where title is passed from seller to buyer under condition whereby:

1. The buyer and seller are typically motivated.

2. Both parties are well informed and acting in what they consider their
own best interest.

3. A reasonable time allowed for exposure in the open market.

ESTIMATED ORDERLY LIQUIDATION VALUE
AS OF DECEMBER 4, 1998.........................................$ 160,000.000

The estimated gross amount expressed in terms of money which could be
typically realized from a sale, given a reasonable period of time to find a
purchaser(s), the seller being compelled to sell on an is-where is basis.

SURVEYOR'S NOTES:

All machinery and equipment aboard the barge appears to be in good condition
and well coated.

This vessel, as described herein, is in satisfactory condition for its intended
service.

The vessel was sighted afloat, without testing for tightness, hull gauging,
conducting sea trials, testing or trying out machinery or electrical systems,
or opening up any of those places ordinarily closed or concealed. Therefore,
deficiencies may exist other than those conditions noted in this report.

131
SURVEY REPORT NO. 9812-1222

SURVEYOR'S NOTES: (continued)

The undersigned Marine Surveyor has no present or contemplated future interest
in the aforementioned vessel and/or its equipment, and compensation for
services has been arranged for on an independent fee basis and is in no way
contingent upon the values reported herein.

Survey made, signed, and submitted without prejudice to rights and/or interests
of whom it may concern.

Attending Surveyor:

Wade R. Oslen

BACHRACH, WOOD, PETERS & ASSOCIATES, INC.

/s/ ANTHONY C. PETERS [SEAL]
-----------------------------------------
Anthony C. Peters,
Principal Surveyor.

WRO:ktb

Distribution:

(2) Reports & (2) Invoices:
Bank One, Texas, NA
Attention: Ms. Karen S. Shouse
910 Travis Street, 7th Floor
TX-2 4260
Houston, Texas 77002

(1) Report:
Transcoastal Marine Services, Inc.
Attention: Mr. John Nowlin
183 Beadle Road
Lafayette, Louisiana 70508

132
[BACHRACH, WOOD, PETERS & ASSOCIATES, INC. LETTERHEAD]

December 11, 1998

Inspection - Ascertain
General Condition and
Fair Market Value
as of
November 30, 1998

SURVEY REPORT NO. 9811-1216

SPUD BARGE "BH 201"

THIS IS TO CERTIFY that the undernamed attending Marine Surveyor did on
November 30, 1998, at the request of Ms. Karen S. Shouse, on behalf of and for
the account of Bank One, Texas, NA, survey the spud barge "BH 201" (an inland,
undocumented vessel; Transcoastal Marine Services, Inc. - reported owners)
while subject vessel was lying afloat in an unladen condition and moored at the
facilities of H.B.H., Inc. in Harvey, Louisiana, in order to ascertain the
general condition and in order to estimate her present day fair market value
and orderly liquidation value as of November 30, 1998.

Note: All sizes, measurements, distances, et cetera, mentioned herein are
approximate, unless otherwise specified.

GENERAL CONSTRUCTION PARTICULARS:

The vessel was built of all welded steel construction. Builder and date of
construction was unknown at time of survey.

Dimensions are: Length - 90', breadth - 23', depth - 5'.

The vessel is two (2) 90' x 8'6" x 5' independent floats connected by means of
two (2) 10' x 6' x 9'6" A-frames fabricated of 16" I-beams, located forward
and aft. Each float has a flush deck, square raked bow, a square raked stern,
and a total of four (4) compartments consisting of one (1) bow rake
compartment, two (2) main body compartments, and one (1) stern rake compartment.

Access to each hull compartment is made through a 18" diameter flush deck type
manhole fitted with a center bolt secured cover.

133
SURVEY REPORT NO. 9811-1216

GENERAL CONSTRUCTION PARTICULARS:

Deck fittings are comprised of the following:

Three (3) 24" cast-steel kevels are ranged along both port and starboard sides.
Two (2) 12" high securing pads are located on both port and starboard sides of
the bow welded to an estimated 8' x 3' doubler.
One (1) 6' x 5' doubler is located on both port and starboard sides just abaft
the forward hoist, each is fitted with one (1) hinge.
One (1) 7' stanchion is located to port on the bow.
Two (2) 12" x 12" spudwells with 30" raised coaming, one (1) located forward on
the starboard side and one (1) located aft on the port side. Each spudwell
has one 30 spud.
Two (2) 8" high retainers each estimated at 18' x 5' are located on the port
half of the deck.
Two (2) 8" high retainers estimated at 15' x 5' are located on the port half of
the deck.
One (1) 8" high retainer estimated at 12' x 5' is located aft on the starboard
side.
Two (2) 30" stanchions fabricated of 6" diameter pipe are located on both port
and starboard sides.

Located aft is a 23' x 18' x 7' building constructed of 4-1/2" pipe with a
corrugated steel roof.

CERTIFICATES/DOCUMENTS:

Subject vessel does not require regulatory bodies, certificates and/or
documents.

EXTERNAL CONDITION:

General:

External coating of coal tar appears in good condition.

Barge does not appear to have any significant corrosion or wastage.

Bow Rake:

Bow rake plating could not be sighted due to the moored position of the barge
at the time of survey.

Stern Rake:

Stern rake plating could not be sighted due to the moored position of the barge
at the time of survey.
134
SURVEY REPORT NO. 9811-1216

EXTERNAL CONDITION: (continued)

Headlog:

Headlog plating contains scattered indents of 0 to 1".

Starboard Side:

Side plating contains scattered indents of 0 to 1".

Sternlog:

Sternlog plating contains scattered indents of 0 to 1".

Port Side:

Side plating contains scattered indents of 0 to 1".

Deck:

Deck plating does not appear to have any significant damage.

Roof of metal building is in poor condition.

DECK EQUIPMENT:

Deck equipment consists of the following:

One (1) triple drum spud winch, powered by a Detroit Diesel 2-71 radiator
cooled.
One (1) Detroit Diesel 2-71, radiator cooled, powering the hydraulic unit.
One (1) single drum winch is located atop the A-frame.

INTERNAL CONDITION:

Interior was void of coating with light rust prevalent.

No significant damage or corrosion was sighted.

135
SURVEY REPORT NO. 9811-1216

VALUATION:

Estimated present day fair market value
as of November 30, 1998.................................$70,000.00

Fair Market Value:

A sum of money that a vessel should bring in a competitive and open market
under all conditions requisite to a fair sale, the buyer and seller, each
acting prudently, knowledgeably, and assuming the price is not affected by
undue stimulus. Implicit in this definition is the consummation of a sale
where title is passed from seller to buyer under condition whereby:

1. The buyer and seller are typically motivated.

2. Both parties are well informed and acting in what they consider their
own best interest.

3. A reasonable time is allowed for exposure in the open market.

Estimated orderly liquidation value
as of November 5, 1998..................................$55,000.00

The estimated gross amount expressed in terms of money which could be
typically realized from a sale, given a reasonable period of time to find a
purchaser(s), the seller being compelled to sell on an is-where is basis.

SURVEYOR'S NOTES:

This vessel, as described herein, is in satisfactory condition for its intended
service.

The vessel was sighted afloat, without testing for tightness, hull gauging,
conducting sea trials, testing or trying out machinery or electrical systems,
or opening up any of those places ordinarily closed or concealed. Therefore,
deficiencies may exist other than those conditions noted in this report.

The undersigned Marine Surveyor has no present or contemplated future interest
in the aforementioned vessel and/or its equipment, and compensation for
services has been arranged for on an independent fee basis and is in no way
contingent upon the values reported herein.
136
SURVEY REPORT NO. 9811-1216

SURVEYOR'S NOTES: (continued)

Survey made, signed, and submitted without prejudice to rights and/or interests
of whom it may concern.

Attending Surveyor:

Joseph L. Aveton

BACHRACH, WOOD, PETERS & ASSOCIATES, INC.

[SEAL]
/s/ ANTHONY C. PETERS
-----------------------------------------
Anthony C. Peters,
Principal Surveyor.

JLA:ktb

Distribution:

(2) Reports & (2) Invoices:
Bank One, Texas, NA
Attention: Ms. Karen S. Shouse
910 Travis Street, 7th Floor
TX-2 4260
Houston, Texas 77002

(1) Report:
Transcoastal Marine Services, Inc.
Attention: Mr. John Nowlin
183 Beadle Road
Lafayette, Louisiana 70508
137
[BACHRACH, WOOD, PETERS & ASSOCIATES, INC. LETTERHEAD]

December 08, 1998

Inspection - Ascertain
General Condition and
Fair Market Value
as of
November 30, 1998

SURVEY REPORT NO. 9811-1212

SPUD BARGE "MM VII"

THIS IS TO CERTIFY that the undernamed attending Marine Surveyor did on
November 30, 1998, at the request of Ms. Karen S. Shouse, and on behalf of and
for the account of Bank One, Texas, NA, survey the undocumented steel Spud
Barge "MM VII", an undocumented vessel of approximately 300 gross tons,
previously assigned the official number 613041; reported owners Transcoastal
Marine Services, Inc. - operators The Woodson Companies - while subject vessel
lay afloat and moored in an unladened condition at the facilities of The
Woodson Companies at Delcambre, Louisiana, in order to ascertain the general
condition of the vessel and in order to estimate her present day fair market
value and orderly liquidation values as of November 30, 1998.

Note: All sizes, measurements, distances, et cetera, mentioned herein are
approximate, unless otherwise specified.

GENERAL CONSTRUCTION PARTICULARS:

The vessel was built of all welded steel construction. Date and circumstances
of construction were unknown at time of survey. However, the vessel appears to
be approximately 25 years old.

Overall dimensions are: Length - 120', breadth - 36', depth - 7'3".

This vessel is a typical inland deck cargo barge, converted for use as a spud
barge and has a flush deck, a square raked bow, a square raked stern, one (1)
bow rake compartment, four (4) main body hull compartments, and one (1) stern
rake compartment.

The vessel is not fit with rub rail fenders.
138
SURVEY REPORT NO. 9811-1212

GENERAL CONSTRUCTION PARTICULARS: (continued)

The vessel is not fit with skegs.

Access to each hull compartment is made via 24" diameter flush deck manhole
with a center bolt cover.

Head log and stern log plating are estimated to be 3/4" original thickness.
Rake knuckle plating is estimated to have been 1/2" original thickness. Bottom
side and deck plating is estimated to have been 3/8" original thickness.
Bulkheads are estimated to have been 5/16" original thickness. The vessel is
framed longitudinally and stiffened transversely. Longitudinal deck beams are 5"
channel spaced on 18" centers. Longitudinal side frames are 4" channel spaced
on 18" centers. Longitudinal bottom frames are 5" channel spaced on 22"
centers. Bulk heads are stiffened vertically with 3" x 2 1/2" angle spaced on
28" centers.

The vessel is stiffened transversely with transverse trusses spaced on 7 foot
centers. All top, bottom and outboard cords are 8" channels. Trusses are
additionally stiffened with 4" x 4" x 1/4" angle vertically spaced on 5 foot
centers and two 4" x 3 1/2" x 1/4" angle diagonals in way of each truss.

The deck fittings consist of one (1) each, approximately 7" double bitts
located on each corner, two (2) each approximately 30" kevels ranged on both
port and starboard sides and one (1) each approximately 7" single bitts located
near mid-length on both port and starboard side.

The vessel is fit with an approximately 6" high steel pollution barrier which
extends around the entire peripheral of the vessel and is fit with drains with
threaded plugs.

The vessel is fit with the remnants of a safety handrail system along both port
and starboard sides.

The vessel is fit with one (1) each approximately 24" square internal spud
wells located fore and aft on the starboard side. Each spud well is fit with
fair lead sheaves to the spud winch which is located forward on the starboard
side. The spud winch is a skid mounted double drum winch of unknown
manufacturer driven by a General Motors 3 cylinder model 3-71 diesel engine
through a power takeoff and a system of shafts and chains. The spud winch is
fit with a local control station and is complete with an approximately 30
gallon fuel oil reserve tank and a 12 volt heavy duty marine battery.

The vessel is fit with two (2) each approximately 18" square by 40 foot long
steel spuds fit in the spud wells.

The area over the spud winch is fit with an approximately 15' x 8' x 8'
platform constructed of 4" diameter pipe stanchions and 4" H beam frames.
139
SURVEY REPORT NO. 9811-1212

GENERAL CONSTRUCTION PARTICULARS: (continued)

The starboard number one main body compartment is fit with a steel access trunk
with a weather tight steel door and stairs leading to the lower hull.

CERTIFICATES/DOCUMENTS:

No documents were on board the vessel at time of survey.

CONDITION:

The vessel was sighted afloat. Reportedly the vessel was last hauled out
during April, 1990. The exterior coating of the vessel is good with only very
occasional light rust patches. The interior of the vessels coating is fair and
approximately 60% effective. Head log plating is heavily distorted on
centerline and shows minor indents throughout. Rake bottom plating is devoid of
major indents. Starboard side plating and rake knuckle set in 0 to 3" over an
area of 8 feet by full depth of vessel in way of the bow double bits. Starboard
side plating shows washboarding and is wavy 0 to 1" throughout with very
occasional major indents of 0 to 2" at scattered locations. Stern log shows
light scattered indents at random locations. Stern rake bottom plating is
devoid of major indents. Port side plating is set in 0 to 3" over 12 feet by
full depth of the vessel extending from the stern forward. Port side plating is
set in 0 to 3" over an area of 12 feet by full depth of the vessel in way of
the bow rake compartment. Remainder of the port side plating shows minor
indents of 0 to 1" throughout and is lightly to moderately pitted and shows
major wastage throughout.

The deck is heavily pitted and wasted throughout with areas of greater than 50%
wastage obvious. The deck shows numerous minor indents due to thin plating.
Bulkheads are obvious. Frames are obvious. Many longitudinal deck beams are
crushed in way of the trusses. The entire deck in way of the stern rake
compartment is set down from 0 to 3" with internals heavily distorted to
conform. The spud wells appear nearly new and in satisfactory condition. The
winch and winch engine appear in satisfactory condition. The stern double
bitts are set inboard in way of the deck distortion. The pollution barrier is
open at scattered locations. The safety hand rails on port and starboard sides
are incomplete. The winch engine was not test operated at time of survey.

VALUATION:

Estimated present day fair market value
as of November 30, 1998....................................$50,000.00
140

SURVEY REPORT NO. 9811-1212

VALUATION: (continued)

Fair Market Value:

A sum of money that a vessel should bring in a competitive and open market
under all conditions requisite to a fair sale, the buyer and seller, each
acting prudently, knowledgeably, and assuming the price is not affected by
undue stimulus. Implicit in this definition is the consummation of a sale
where title is passed from seller to buyer under condition whereby:

1. The buyer and seller are typically motivated.

2. Both parties are well informed and acting in what they consider their
own best interest.

3. A reasonable time is allowed for exposure in the open market.

Estimated orderly liquidation value
as of November 30, 1998...................................$45,000.00

SURVEYOR'S NOTES:

All machinery and equipment aboard the barge appears to be in good condition
and well coated.

The vessel was sighted afloat, without testing for tightness, hull gauging,
conducting sea trials, testing or trying out machinery or electrical systems,
or opening up any of those places ordinarily closed or concealed. Therefore,
deficiencies may exist other than those conditions noted in this report.

The undersigned Marine Surveyor has no present or contemplated future interest
in the aforementioned vessel and/or its equipment, and compensation for
services has been arranged for on an independent fee basis and is in no way
contingent upon the values reported herein.
141

SURVEY REPORT NO. 9811-1212

SURVEYOR'S NOTES: (continued)

Survey made, signed, and submitted without prejudice to rights and/or interests
of whom may concern.

Attending Surveyor:

John M. Swanson

BACHRACH, WOOD, PETERS & ASSOCIATES, INC

[SEAL]

/s/ ANTHONY C. PETERS
-----------------------------------------
Anthony C. Peters,
Principal Surveyor.

JMS:maw

Distribution:

(2) Reports & (2) Invoices:
Bank One, Texas, NA
Attention: Ms. Karen S. Shouse
910 Travis Street, 7th Floor
TX-2 4260
Houston, Texas 77002

(1) Report:
Transcoastal Marine Services, Inc.
Attention: Mr. John Nowlin
183 Beadle Road
Lafayette, Louisiana 70508
142
SCHEDULE 2

LIST OF EQUIPMENT
(more fully described in Schedule "2" Attachment 1
attached hereto)

================================================================================
ASSET NAME TYPE DESCRIPTION
================================================================================

BH 103 Spud Barge American flag; dimensions of 120'x39'x8'; built
by Conrad Industries, Inc. in Morgan City, LA in
1991
- --------------------------------------------------------------------------------
BH 101 Spud Barge American flag; dimensions of 120'x 36'x7'; built
in Houma, LA in 1979
- --------------------------------------------------------------------------------
BH 7 Deck Barge American flag; dimensions of 120'x 30' x7'; built
by Alexander Shipyard
- --------------------------------------------------------------------------------
Missy Ann Tug Boat American flag; dimensions of 48'x 16.7'x5.8';
built in Houma, LA in 1975
- --------------------------------------------------------------------------------
Danny Boy II Tug Boat American flag; dimensions of 36.5'x 14'x 4.7';
built in Harvey, LA in 1969
================================================================================

143
[BACHRACH, WOOD, PETERS & ASSOCIATES, INC. LETTERHEAD]

December 11, 1998

Inspection - Ascertain
General Condition and
Fair Market Value
as of
December 1, 1998

SURVEY REPORT NO. 9812-1219

SPUD BARGE "BH 103"

THIS IS TO CERTIFY that the undernamed attending Marine Surveyor did on
December 1, 1998, at the request of Ms. Karen S. Shouse, on behalf of and for
the account of Bank One, Texas, NA, survey the spud barge "BH 103" (an
undocumented vessel; Transcoastal Marine Services, Inc. - reported owners)
while subject vessel was lying afloat in a laden condition and moored on Lake
Pontchartrain in New Orleans, Louisiana, in order to ascertain the general
condition and in order to estimate her present day fair market value and
orderly liquidation value as of December 1, 1998.

Note: All sizes, measurements, distances, et cetera, mentioned herein are
approximate, unless otherwise specified.

GENERAL CONSTRUCTION PARTICULARS:

The vessel was built of all welded steel construction by Conrad Industries,
Inc. in Morgan City, Louisiana during 1991.

Dimensions are: Length - 120', breadth - 39', depth - 8'.

The vessel has a flush deck, a square raked bow, a square raked stern, and a
total of eight (8) compartments consisting of one (1) bow rake compartment, six
(6) main body compartments, and one (1) stern rake compartment.

Access to each hull compartment is made through a raised deck type manhole
fitted with a center bolt secured cover, except for the No. 3 starboard main
compartment which is used for storage and is accessible via a enclosed type
ladderwell.

The hull is fitted with two (2) strakes of formed plate rub rail which extends
from the bow to the stern on both port and starboard sides.

144
SURVEY REPORT NO. 9810-1219

GENERAL CONSTRUCTION PARTICULARS: (continued)

A 2-tier handrail, constructed of 5" horizontal and 8" vertical pipe, extends
around the stern and extends 60' forward on both port and starboard sides.

Deck fittings consists of the following:

One (1) 16" towing button is located on port and starboard sides of the bow.
One (1) 8" diameter cast steel double bitt is located on port and starboard
sides of the stern.
Two (2) 30" cast steel kevels are ranged along both port and starboard sides.
One (1) 24"x24" spudwell fitted atop a 36" coaming, is located on each port and
starboard and on the stern center line. Each contains one (1) 40' spud.

Located aft on the deck is a 33' x 40' deckhouse constructed of wooden siding
with a corrugated steel roof.

Extending forward 20' of the deckhouse is a steel shelter constructed of 16"
diameter pipe and steel plate.

The No. 3 starboard main compartment is used for a below deck storage and tool
room and contains one (1) Red Fox sewage treatment plant.

CERTIFICATES/DOCUMENTS:

Subject vessel does not require regulatory bodies, certificate and/or documents:

DECK EQUIPMENT:

Deck equipment consists of the following:

One (1) American, model 9720, 100 ton crane/dragline mounted atop a turret and
welded to the deck on the center line forward.
One (1) Conmaco triple drum winch powered by a General Motors 4-71 diesel
engine.
One (1) Lincoln welding machine powered by a General Motors diesel engine,
labeled H.B.H. 407.
One (1) Hawco claw type bucket.
One (1) Conmaco 4000 lb. pile driving hammer.

Equipment on top of the steel shelter consists of the following:

One (1) Hawco claw type bucket.
One (1) Hendrix drag type bucket.
One (1) 40' pile driving leads located in a bracket constructed along the port
side of the deckhouse roof.

145
SURVEY REPORT NO. 9812-1219

DECK EQUIPMENT: (continued)

One (1) 17' aluminum boat with an Evinrude 25 HP outboard motor.
One (1) 50 KW generator powered by a General Motors 4-71 diesel engine.
Two (2) fuel tanks of unknown capacity.

DECKHOUSE:

The deckhouse has two (2) doors, forward and aft, with sleeping quarters for
nineteen (19) persons, a galley/mess area, and a washroom.

Interior of the deckhouse is furbished with prefinished wood paneling and wood
trim.

Arrangements are as follows:

Forward to starboard is a restroom with two (2) toilets, two (2) shower stalls,
and three (3) sinks.

Forward to port is a closet.

Aft to port is an office with one (1) desk, one (1) TV, and two (2) double
bunks.

Aft to starboard is the galley/mess area which contains the following:

One (1) large double stainless steel sink.
One (1) stainless steel stove/oven.
One (1) double fryer.
One (1) Sharp microwave.
One (1) Scotsman ice maker.
Two (2) refrigerator/freezers.
Two (1) upright freezers.
Two (2) coffee makers.
Three (3) stools.
One (1) 15'x 5' table with fixed benches.
One (1) color TV.

Aft to port is a closet for dry stores.

Aft to port is a large bunkroom containing five (5) triple bunks and lockers.

Aft to port is two (2) closets for dry stores.

Cooling is effected through eight (8) window mounted air-conditioning units.

146
SURVEY REPORT NO. 9812-1219

ELECTRICAL:

Interior wiring is basket weave and circuit breakers and industrial/marine type
incandescent/fluorescent.

TANK CAPACITIES:

Below deck tank capacities are as follows:

Two (2) fuel oil tanks..............2,513.28 USG each.
Two (2) fresh water tanks...........6,283 USG each.
One (1) fresh water tank............13,643 USG.

EXTERNAL CONDITION:

External coating of coal tar epoxy is in excellent condition.

Barge does not appear to have any significant corrosion, wastage, or major
indents.

INTERNAL CONDITION:

Internals are in good condition and appear to have a good coating of epoxy.

No significant damage or corrosion was sighted.

VALUATION:

ESTIMATED PRESENT DAY FAIR MARKET VALUE
AS OF DECEMBER 1, 1998...................................$575,000.00

Fair Market Value:

A sum of money that a vessel should bring in a competitive and open market
under all conditions requisite to a fair sale, the buyer and seller, each
acting prudently, knowledgeably, and assuming the price is not affected by
undue stimulus. Implicit [ILLEGIBLE] this definition is the consummation
of a sale where title is passed from seller to buyer under condition
whereby:

1. The buyer and seller are typically motivated.

2. Both parties are well informed and acting in what they consider their
own best interest.

3. A reasonable time is allowed for exposure in the open market.

147
SURVEY REPORT NO. 9812-1219

VALUATION:(continued)

Estimated orderly liquidation value
as of December 1, 1998.........................................$500,000.00

The estimated gross amount expressed in terms of money which could be
typically realized from a sale, given a reasonable period of time to find a
purchaser(s), the seller being compelled to sell on an is-where is basis.

SURVEYOR'S NOTES:

All machinery and equipment aboard the barge appears to be in good condition
and well coated.

This vessel, as described herein, is in satisfactory condition for its intended
service.

This survey represents the good faith opinion of the surveyor only and does
not make any representations of fact. It was performed for insurance
underwriting and/or appraisal purposes only, and no warranty of
correctness of this surveyor as to be condition, seaworthiness, value, or
marketability of subject vessel is either expressed or implied.

The vessel was sighted afloat, without testing for tightness, hull gauging,
conducting sea trials, testing or trying out machinery or electrical systems,
or opening up any of those places ordinarily closed or concealed. Therefore,
deficiencies may exist other than those conditions noted in this report.

The undersigned Marine Surveyor has no present or contemplated future interest
in the aforementioned vessel and/or its equipment, and compensation for
services has been arranged for an independent fee basis and is no way
contingent upon the values reported herein.

Survey made, signed, and submitted without prejudice to rights and/or interests
of whom it may concern.

Attending Surveyor:

Tom Payne

BACHRACH, WOOD, PETER & ASSOCIATES, INC.

[SEAL]

/s/ ANTHONY C. PETERS
----------------------------------------
Anthony C. Peters,
Principal Surveyor.

148
SURVEY REPORT NO. 9812-1219

SURVEYOR'S NOTES: (continued)

TP:ktb

Distribution:

(2) Reports & (2) Invoices:
Bank One, Texas, NA
Attention: Ms. Karen S. Shouse
910 Travis Street, 7th Floor
TX-2 4260
Houston, Texas 77002

(1) Report:
Transcoastal Marine Services, Inc.
Attention: Mr. John Nowlin
183 Beadle Road
Lafayette, Louisiana 70508

149
[BACHRACH, WOOD, PETERS & ASSOCIATES, INC. LETTERHEAD]

December 11, 1998

Inspection - Ascertain
General Condition and
Fair Market Value
as of
November 30, 1998

SURVEY REPORT NO. 9811-1215

SPUD BARGE "BH 101"

THIS IS TO CERTIFY that the undernamed attending Marine Surveyor did on
November 30, 1998, at the request of Ms. Karen S. Shouse, on behalf of and for
the account of Bank One, Texas, NA, survey the spud barge "BH 101" (613616
official number, of 258 gross and net tons; Transcoastal Marine Services, Inc.
- - reported owners) while subject vessel was lying afloat in a laden condition
and moored at the facilities of H.B.H., Inc. in Harvey, Louisiana, in order to
ascertain the general condition and in order to estimate her present day fair
market value and orderly liquidation value as of November 30, 1998.

Note: All sizes, measurements, distances, et cetera, mentioned herein are
approximate, unless otherwise specified.

GENERAL CONSTRUCTION PARTICULARS:

The vessel was built of all welded steel construction in Houma, Louisiana during
1979.

Dimensions are: Length - 120', breadth - 36', depth - 7'.

Access to each hull compartment is made through a 4" raised deck type manhole
fitted with a center bolt secured cover.

The hull is fitted with two (2) strakes of 11" formed plate rub rail which
extends from the bow to the stern on both port and starboard sides.
150
SURVEY REPORT NO. 9811-1215

GENERAL CONSTRUCTION PARTICULARS: (continued)

Port, starboard, and bow deck gunnels are fitted with a 38" coaming for the
full length with freeing ports at random locations.

Deck fitting consists of the following:

One (1) 8" diameter cast steel double bitt is located in way of each stern
corner.
Two (2) 36" cast steel kevels are ranged along both port and starboard sides.
One (1) 24" cast steel kevel is located on both port and starboard sides of the
bow.
One (1) 24" cast steel kevel is located to both port and starboard of the stern
center line.
One (1) 16'x30' crane mat is located just forward of amidships.
One (1) 18"x18" spudwell fitted atop a 36" coaming, is located on each port and
starboard and on the stern center line. Spudwells each contain one (1) 40'
spud.
Two (2) heavy tow pads are located forward on both port and starboard sides.

CERTIFICATES/DOCUMENTS:

The vessel has on board the following certificates and/or documents:

United States Coast Guard Certificate of Documentation which is valid until 31
May 1999.

DECK EQUIPMENT:

Deck equipment consists of the following:

One (1) American, model No. 120B, triple drum winch powered by a General Motors
4-71 diesel engine, through a Twin Disc, SP111HP1, drive.
One (1) American, model No. 9225, 125-ton pedestal mounted crane.
One (1) 40 KW Delco AC generator powered by a Detroit Diesel 4-71 engine.
One (1) 5 yard rehandling clam bucket.
One (1) 4 yard round nose digging bucket.

EXTERNAL CONDITION:

External coating of coal tar epoxy is in excellent condition.

Deck perimeter and deck fittings coating of yellow epoxy is in excellent
condition.

Barge does not appear to have any significant corrosion, wastage, or major
indents.

LIVING QUARTERS:

Located on deck is one (1) 27'x40' wooden building, having sleeping quarters
for nineteen (19) persons.
151
SURVEY REPORT NO. 9811-1215

LIVING QUARTERS: (continued)

Forward to starboard is the head containing two (2) shower stalls, two (2)
toilets, and three (3) sinks.

Forward to port are four (4) bunks and just to aft are fifteen (15) bunks.

Aft is the galley with the kitchen located forward and one (1) table with two
(2) built-in benches located aft.

In the building is the following equipment and/or machinery:

Two (2) Kenmore refrigerators.
One (1) Vulcan electric range.
One (1) Sharp carousel microwave.
One (1) Scotsman ice machine.
One (1) White-Westinghouse freezer.
One (1) Samsung, model FX505, fax machine.
Five (5) Whirlpool window air-conditioning units.
Two (3) Kenmore window air-conditioning units.

INTERNAL CONDITION:

Internals are in good condition and appear to have a good coating of Texaco
compound H.

No significant damage or corrosion was sighted.

VALUATION:

Estimated present day fair market value
as of November 30, 1998........................................ $425,000.00

Fair Market Value:

A sum of money that a vessel should bring in a competitive and open market
under all conditions requisite to a fair sale, the buyer and seller, each
acting prudently, knowledgeably, and assuming the price is not affected by
undue stimulus. Implicit in this definition is the consummation of a sale
where title is passed from seller to buyer under condition whereby:

1. The buyer and seller are typically motivated.

2. Both parties are well informed and acting in what they consider their
own best interest.

152
SURVEY REPORT NO. 9811-1215

VALUATION:(continued)

3. A reasonable time is allowed for exposure in the open market.

Estimated orderly liquidation value
as of November 30, 1998.........................................$350,000.00

The estimated gross amount expressed in terms of money which could be
typically realized from a sale, given a reasonable period of time to find a
purchaser(s), the seller being compelled to sell on an is-where is basis.

SURVEYOR'S NOTES:

All machinery and equipment aboard the barge appears to be in good condition
and well coated.

This vessel, as described herein, is in satisfactory condition for its intended
service.

This survey represents the good faith opinion of the surveyor only and does
not make any representations of fact. It was performed for insurance
underwriting and/or appraisal purposes only, and no warranty of
correctness of this surveyor as to be condition, seaworthiness, value, or
marketability of subject vessel is either expressed or implied.

The vessel was sighted afloat, without testing for tightness, hull gauging,
conducting sea trials, testing or trying out machinery or electrical systems,
or opening up any of those places ordinarily closed or concealed. Therefore,
deficiencies may exist other than those conditions noted in this report.

The undersigned Marine Surveyor has no present or contemplated future interest
in the aforementioned vessel and/or its equipment, and compensation for
services has been arranged for on an independent fee basis and is no way
contingent upon the values reported herein.

Survey made, signed, and submitted without prejudice to rights and/or interests
of whom it may concern.

Attending Surveyor:

Joseph L. Aveton

153
SURVEY REPORT NO. 9811-1215

SURVEYOR'S NOTES: (continued)

BACHRACH, WOOD, PETERS & ASSOCIATES, INC.

[SEAL]

/s/ ANTHONY C. PETERS
----------------------------------------
Anthony C. Peters,
Principal Surveyor.

JLA:ktb

Distribution:

(2) Reports & (2) Invoices:
Bank One, Texas, NA
Attention: Ms. Karen S. Shouse
910 Travis Street, 7th Floor
TX-2 4260
Houston, Texas 77002

(1) Report:
Transcoastal Marine Services, Inc.
Attention: Mr. John Nowlin
183 Beadle Road
Lafayette, Louisiana 70508

154
[BACHRACH, WOOD, PETERS & ASSOCIATES, INC. LETTERHEAD]

December 11, 1998

Inspection-Ascertain
General Condition and
Fair Market Value
as of
December 1, 1998

SURVEY REPORT NO. 9812-1218

BARGE "BH 7"

THIS IS TO CERTIFY that the undernamed attending Marine Surveyor did on
December 1, 1998, at the request of Ms. Karen S. Shouse, on behalf of and for
the account of Bank One, Texas, NA, survey the deck barge "BH 7" (an
undocumented vessel; Transcoastal Marine Services, Inc. - reported owners)
while subject vessel was lying afloat in a laden condition and moored on Lake
Pontchartrain in New Orleans, Louisiana, in order to ascertain the general
condition and in order to estimate her present day fair market value and
orderly liquidation value as of December 1, 1998.

NOTE: ALL SIZES, MEASUREMENTS, DISTANCES, ET CETERA, MENTIONED HEREIN ARE
APPROXIMATE, UNLESS OTHERWISE SPECIFIED.

GENERAL CONSTRUCTION PARTICULARS:

The vessel was built of all welded steel construction by Alexander Shipyard.
Date of construction was unknown at the time of survey.

Dimensions are: Length-120', breadth-30', depth-7'.

Access to each hull compartment is made through a flush deck type manhold
fitted with a center bolt secured cover.

The hull is fitted with one (1) longitudinal strake of 16" formed plate rub
rail which extends from the bow to the stern on both port and starboard sides.

155
SURVEY REPORT NO. 9812-1218

A 30" bin-wall extends from the bow to the stern on both port and starboard
sides. A 30" removable bin-wall extends across the bow and stern.

Deck fittings consists of the following:

One (1) 10" double bitt on each corner of the barge hull.
Two (2) 36" kevels are ranged along both port and starboard sides.

CERTIFICATES/DOCUMENTS:

Subject vessel does not require regulatory bodies, certificates and/or
documents:

EXTERNAL CONDITION:

Bin-wall external coating is in fair to good condition.

Bin-wall internal coating is in fair to poor condition.

Deck plating inside bin-wall lightly washboarded with indents of 0 to 1" at
random locations.

Deck plating outside bin-wall appears free of any notable indents.

Coaming caps show numerous mild to moderate indents.

Bin-wall vertical stiffeners are in good condition with the coating in fair to
good condition.

Removable bin-wall contains moderate to heavy distortion with the coating in
poor condition.

Rub rail contains indents of 0 to 1" at random.

INTERNAL CONDITION:

An internal inspection was not done due to the barge being loaded with water to
a freeboard of approximately 20" at the time of the survey.

VALUATION:

Estimated present day fair market value
as of December 1, 1998....................................$125,000.00
156
SURVEY REPORT NO. 9812-1218

VALUATION: (continued)

Fair Market Value:

A sum of money that a vessel should bring in a competitive and open market
under all conditions requisite to a fair sale, the buyer and seller, each
acting prudently, knowledgeably, and assuming the price is not affected by
undue stimulus. Implicit in this definition is the consummation of a sale
where title is passed from seller to buyer under condition whereby:

1. The buyer and seller are typically motivated.

2. Both parties are well informed and acting in what they consider their
own best interest.

3. A reasonable time is allowed for exposure in the open market.

Estimated orderly liquidation value
as of December 1, 1998.........................................$100,000.00

The estimated gross amount expressed in terms of money which could be
typically realized from a sale, given a reasonable period of time to find a
purchaser(s), the seller being compelled to sell on an is-where is basis.

SURVEYOR'S NOTES:

All machinery and equipment aboard the barge appears to be in good condition
and well coated.

This vessel, as described herein, is in satisfactory condition for its intended
service.

This survey represents the good faith opinion of the surveyor only and does
not make any representations of fact. It was performed for insurance
underwriting and/or appraisal purposes only, and no warranty of
correctness of this surveyor as to be condition, seaworthiness, value, or
marketability of subject vessel is either expressed or implied.

The vessel was sighted afloat, without testing for tightness, hull gauging,
conducting sea trials, testing or trying out machinery or electrical systems,
or opening up any of those places ordinarily closed or concealed. Therefore,
deficiencies may exist other than those conditions noted in this report.

The undersigned Marine Surveyor has no present or contemplated future interest
in the aforementioned vessel and/or its equipment, and compensation for
services has been arranged for on an independent fee basis and is in no way
contingent upon the values reported herein.
157
SURVEY REPORT NO. 9812-1218

SURVEYOR'S NOTES: (continued)

Survey made, signed, and submitted without prejudice to rights and/or interests
of whom it may concern.

Attending Surveyor:

Tom Payne

BACHRACH, WOOD, PETERS & ASSOCIATES, INC.

[SEAL]

/s/ ANTHONY C. PETERS
----------------------------------------
Anthony C. Peters,
Principal Surveyor.

TP:ktb

Distribution:

(2) Reports & (2) Invoices:
Bank One, Texas, NA
Attention: Ms. Karen S. Shouse
910 Travis Street, 7th Floor
TX-2 4260
Houston, Texas 77002

(1) Report:
Transcoastal Marine Services, Inc.
Attention: Mr. John Nowlin
183 Beadle Road
Lafayette, Louisiana 70508

158
[BACHRACH, WOOD, PETERS & ASSOCIATES, INC. LETTERHEAD]

December 11, 1998

Inspection - Ascertain
General Condition and
Fair Market Value
as of
December 2, 1998

SURVEY REPORT NO. 9812-1220

M/V "MISSY ANN"

THIS IS TO CERTIFY that the undernamed attending Marine Surveyor did on
December 2, 1998, at the request of Ms. Karen S. Shouse, on behalf of and for
the account of Bank One, Texas, NA, survey the M/V "MISSY ANN" (570690 official
number; Home Port - New Orleans, Louisiana; of 35 gross and 24 net tons;
Transcoastal Marine Services, Inc. - reported owners), while subject vessel was
afloat and moored in Venice, Louisiana, in order to ascertain the general
condition and in order to estimate her present day fair market value and
orderly liquidation value as of December 2, 1998.

NOTE: ALL SIZES, MEASUREMENTS, DISTANCES, ET CETERA, MENTIONED HEREIN ARE
APPROXIMATE, UNLESS OTHERWISE SPECIFIED.

GENERAL CONSTRUCTION PARTICULARS:

The vessel was built of all welded steel construction in Houma, Louisiana
during 1975.

Overall dimension: Length-48', breadth-16.7', depth-5.8'.

The vessel is a typical twin screw, single engine, tugboat with a model bow, a
transom stern, a flush deck, and a steel double level superstructure, which is
used primarily inshore.

The hull is protected by means of two (2) strakes of rub rail fenders
constructed of 10" formed plate. Additionally, the entire perimeter of the hull
is protected by tires suspended by chains. The bow is additionally protected by
rubber padding.

Bulwarks approximately 18" high extend around the entire perimeter of the
vessel.

Access to lower hull spaces is made via flush deck manholes with center bolt
covers.

159
[BACHRACH, WOOD, PETERS & ASSOCIATES, INC LETTERHEAD]

SURVEY REPORT NO. 9810-1220

GENERAL CONSTRUCTION PARTICULARS: (continued)

Deck fittings consist of the following:

Two (2) 5" double bitts are located forward and aft on both port and starboard
sides.
One (1) 12" H-bitt is located on the center line at the stern.
Two (2) BB, serves as BB 40 make up winches on the bow each with a 5 ton
capacity.
One (1) 8" single bitt on the bow center line.
One (1) winch is located on bow center line.

A 3-tier handrail and stair system extends from the center line to
approximately 15' abaft the bow around both port and starboard side of the
pilothouse.

CERTIFICATES/DOCUMENTS:

Subject vessel has aboard the following certificates and/or documents:

United States Coast Guard Certificate of Documentation which is valid until 31
August 1999, documenting vessel for coastwise use.

SAFETY AND FIRE FIGHTING EQUIPMENT:

Lifesaving and fire equipment consists of the following:

Two (2) 30" ring buoys fitted with water lights.
An adequate complement of life preserves for the crew on board.
Four (4) ABC dry chemical fire extinguishers.
One (1) fire ax.

TANK CAPACITIES:

Diesel fuel oil..................... 3,500 gallons.
Water............................... 2,000 gallons.

PILOTHOUSE LEVEL:

The pilothouse is located on the upper level. Located atop the pilothouse are
the following

One (1) mast with navigation lights.
Two (2) VHF antennas.
One (1) spotlight.
One (1) horn.
Running lights.

160

SURVEY REPORT NO. 9810-1220

PILOTHOUSE LEVEL: (continued)

The pilothouse contains the following equipment and/or furniture:

One (1) steering wheel.
Main engine controls.
Main engine gauges.
One (1) Standard Horizon Eclipse VHF radio transceiver.
One (1) Furuno, serial No. 864-4019 radar with a 48 mile range.
One (1) Sitex, model WR77, VHF radio.
Main engine emergency shut-downs.
Navigation light switch panel.
One (1) pilot stool.
One (1) Phillips TV.
One (1) compass.
One (1) bunk bed.
One (1) Kenmore window mounted air-conditioning unit.

Abaft the pilothouse is an open-type steering station which contains one (1)
steering wheel and main engine controls.

MAIN DECK:

Main deck is located below the pilothouse level and is accessible through one
(1) watertight door.

Located forward is the galley which contains the following equipment:

One (1) Kenmore stove.
One (1) Kenmore refrigerator/freezer.
One (1) double stainless steel sink.
One (1) box fan.

Access to the engine room is via two (2) watertight door.

ELECTRICAL:

Electrical system is 110-volt run by a generator powered by a Detroit Diesel
2-71, keel cooled.

MACHINERY:

The vessel is twin screw. Propulsion machinery consists of one (1) Detroit
Diesel V8 engine, driving two (2) 3 blade stainless steel propellers through
Twin Disc, model MG5 marine reverse/reduction gears with 4:1 ratio. Engine is
keel cooled.
161
SURVEY REPORT NO. 9812-1220

CONDITION:

The hull coating is in good condition with minor indents and scratches.

Vessel is in good condition.

VALUATION:

Estimated present day fair market value
as of December 2, 1998........................................ $ 95,000.00

Fair Market Value:

A sum of money that a vessel should bring in a competitive and open market
under all conditions requisite to a fair sale, the buyer and seller, each
acting prudently, knowledgeably, and assuming the price is not affected by
undue stimulus. Implicit in this definition is the consummation of a sale
where title is passed from seller to buyer under condition whereby:

1. The buyer and seller are typically motivated.

2. Both parties are well informed and acting in what they consider their
own best interest.

3. A reasonable time is allowed for exposure in the open market.

Estimated orderly liquidation value
as of December 2, 1998.........................................$ 75,000.00

The estimated gross amount expressed in terms of money which could be
typically realized from a sale, given a reasonable period of time to find a
purchaser(s), the seller being compelled to sell on an is-where is basis.

SURVEYOR'S NOTES:

All machinery and equipment aboard the vessel appears to be in good condition
and well coated.

This vessel, as described herein, is in satisfactory condition for its intended
service.

This survey represents the good faith opinion of the surveyor only and does
not make any representations of fact. It was performed for insurance
underwriting and/or appraisal purposes only, and no warranty of
correctness of this surveyor as to be condition, seaworthiness, value, or
marketability of subject vessel is either expressed or implied.

162
SURVEY REPORT NO. 9812-1220

SURVEYOR'S NOTES: (continued)

The vessel was sighted afloat, without testing for tightness, hull gauging,
conducting sea trials, testing or trying out machinery or electrical systems,
or opening up any of those places ordinarily closed or concealed. Therefore,
deficiencies may exist other than those conditions noted in this report.

The undersigned Marine Surveyor has no present or contemplated future interest
in the aforementioned vessel and/or its equipment, and compensation for
services has been arranged for an independent fee basis and is no way
contingent upon the values reported herein.

survey made, signed, and submitted without prejudice to rights and/or interests
of whom it may concern.

Attending Surveyor:

Wade R. Olsen

BACHRACH, WOOD, PETER & ASSOCIATES, INC.

[SEAL]

/s/ ANTHONY C. PETERS
----------------------------------------
Anthony C. Peters,
Principal Surveyor.

WRO:rtb

Distribution:

(2) Reports & (2) Invoices:
Bank One, Texas, NA
Attention: Ms. Karen S. Shouse
910 Travis Street, 7th Floor
TX-2 4260
Houston, Texas 77002

(1) Report:
Transcoastal Marine Services, Inc.
Attention: Mr. John Nowlin
183 Beadle Road
Lafayette, Louisiana 70508

163
[BACHRACH, WOOD, PETERS, & ASSOCIATES, INC. LETTERHEAD]

December 11, 1998

Inspection - Ascertain
General Condition and
Fair Market Value
as of
November 30, 1998

SURVEY REPORT NO. 9811-1217

M/V "DANNY BOY II"

THIS IS TO CERTIFY that the undernamed attending Marine Surveyor did on November
30, 1998, at the request of Ms. Karen S. Shouse, on behalf of and for the
account of Bank One, Texas, NA, survey the M/V "DANNY BOY II" (519558 official
number; of 21 gross and 14 net tons; Transcoastal Marine Services, Inc. -
reported owners), while subject vessel was afloat and moored at the facilities
of H.B.H., Inc. in Harvey, Louisiana, in order to ascertain the general
condition and in order to estimate her present day fair market value and
orderly liquidation value as of November 30, 1998.

NOTE: ALL SIZES, MEASUREMENTS, DISTANCES, ET CETERA, MENTIONED HEREIN ARE
APPROXIMATE, UNLESS OTHERWISE SPECIFIED.

GENERAL CONSTRUCTION PARTICULARS:

The vessel was built of all welded steel construction in Harvey, Louisiana
during 1969.

Registered dimensions: Length - 36.5', breadth - 14.0', depth - 4.7'.

The vessel is a typical inshore fleet push boat with a square raked bow
with 5' push knees, a transom stern, a flush deck, and a steel double level
superstructure located amidship.

The hull is protected by means of one (1) rub rail fender constructed of
11" double formed plate. The bow and bow corners have heavy duty rubber
bumpers. Thirty-seven (37) tires, suspended by chain, are located on the
stern, and port and starboard sides.

The vessel is framed transversely and stiffened longitudinally.

Bulwarks approximately 12" high are located around the entire perimeter of
the vessel.

164
SURVEY REPORT NO. 9811-1217

GENERAL CONSTRUCTION PARTICULARS: (continued)

Deck fittings consist of the following:

Two (2) 5" H-bitts are located on each port and starboard sides and one (1) on
bow center line.
One (1) 9" H-bitt is located on the center line at the stern.
Two (2) BeeBee spur gear make up winches are located on the bow.

A 1-tier handrail and stair system extends from the forward deck to the
pilothouse with a 2-tier handrail around the pilothouse.

Lower level of superstructure is not used.

CERTIFICATES/DOCUMENTS:

Subject vessel has aboard the following certificates and/or documents:

A Federal Communications Commission License which is valid until 18 September
2006.

United States Coast Guard Certificate of Documentation which is valid until May
1999.

SAFETY AND FIRE FIGHTING EQUIPMENT:

Lifesaving and fire equipment consists of the following:

Two (2) 30" ring buoys.
Two (2) Type III, ABC dry chemical fire extinguishers.

TANK CAPACITIES:

Diesel fuel oil ............... 1,000 gallons.

Access to lower hull spaces is made via 4" raised deck manholes with center
bolt covers.

PILOTHOUSE LEVEL:

The pilothouse is located on the upper level. Located atop the pilothouse is
the following:

One (1) mast with navigation lights.
Two (2) VHF antennas.
One (1) spotlight.
One (1) horn.

165
SURVEY REPORT NO. 9811-1217

PILOTHOUSE LEVEL: (continued)

The pilothouse contains the following equipment and/or furniture:

One (1) steering wheel.
Main engine controls.
Main engine gauges.
Two (2) Standard Horizon VHF radio transceivers.
Main engine emergency shut-downs.
Navigation light switch panel.
One (1) pilot stool.
One (1) Motorola Company radio.
One (1) SiTex, model T-170, radar.
One (1) General Electric 9" TV.
One (1) bed.
One (1) Whirlpool window air-conditioning unit.
One (1) Kenmore refrigerator.

ELECTRICAL

Electrical system is 12-volt powered by two(2) main engine driven alternators
and six (6) 12-volt batteries.

MACHINERY:

The vessel is single screw. Propulsion machinery consists of one (1) Detroit
Diesel 8-71 engine rated at 400 HP. Engine is keel cooled.

Located on deck is one (1) Lima Magna Plus, model 281FSL1501, 120-volt AC
generator, 31 amp, powered by a Kuboto, model D590, 6-cylinder F1 diesel engine.

CONDITION:

Hull coating of coal tar epoxy is in good condition.

Side plating contains few indents of 0 to 1".

Rub rail is in good condition.

Handrail is in good condition.

Pilothouse is well coated with white paint with no noted indents.

Deck is well coated with red paint.

166
SURVEY REPORT NO. 9811-1217

VALUATION:

ESTIMATED PRESENT DAY FAIR MARKET VALUE
AS OF NOVEMBER 30, 1998........................................ $ 75,000.00

Fair Market Value:

A sum of money that a vessel should bring in a competitive and open market
under all conditions requisite to a fair sale, the buyer and seller, each
acting prudently, knowledgeably, and assuming the price is not affected by
undue stimulus. Implicit in this definition is the consummation of a sale
where title is passed from seller to buyer under condition whereby:

1. The buyer and seller are typically motivated.

2. Both parties are well informed and acting in what they consider their
own best interest.

3. A reasonable time is allowed for exposure in the open market.

ESTIMATED ORDERLY LIQUIDATION VALUE
AS OF NOVEMBER 30, 1998.........................................$ 60,000.00

The estimated gross amount expressed in terms of money which could be
typically realized from a sale, given a reasonable period of time to find a
purchaser(s), the seller being compelled to sell on an is-where is basis.

SURVEYOR'S NOTES:

All machinery and equipment aboard the vessel appears to be in good condition
and well coated.

This vessel, as described herein, is in satisfactory condition for its intended
service.

This survey represents the good faith opinion of the surveyor only and does
not make any representations of fact. It was performed for insurance
underwriting and/or appraisal purposes only, and no warranty of
correctness of this surveyor as to the condition, seaworthiness, value, or
marketability of subject vessel is either expressed or implied.

The vessel was sighted afloat, without testing for tightness, hull gauging,
conducting sea trials, testing or trying out machinery or electrical systems,
or opening up any of those places ordinarily closed or concealed. Therefore,
deficiencies may exist other than those conditions noted in this report.

167
SURVEY REPORT NO. 9811-1217

SURVEYOR'S NOTES: (continued)

The undersigned Marine Surveyor has no present or contemplated future interest
in the aforementioned vessel and/or its equipment, and compensation for services
has been arranged for on an independent fee basis and is in no way contingent
upon the values reported herein.

Survey made, signed, and submitted without prejudice to rights and/or interests
of whom it may concern.

Attending Surveyor:

Joseph L. Aveton

BACHRACH, WOOD, PETERS & ASSOCIATES, INC.

[SEAL]

/s/ ANTHONY C. PETERS
----------------------------------------
Anthony C. Peters,
Principal Surveyor.

JLA:ktb

Distribution:

(2) Reports & (2) Invoices:
Bank One, Texas, NA
Attention: Ms. Karen S. Shouse
910 Travis Street, 7th Floor
TX-2 4260
Houston, Texas 77002

(1) Report:
Transcoastal Marine Services, Inc.
Attention: Mr. John Nowlin
183 Beadle Road
Lafayette, Louisiana 70508

168
SCHEDULE 7.5
LITIGATION

Sirpi Alusteel Construction, Ltd. v. Dickson GMP International

This case involves a contractual dispute in which Dickson has filed a cross
claim that if successful would eliminate any damages alleged by Sirpi and in
addition would result in a monetary judgement in favor of Dickson. We have been
told by counsel for Dickson that maximum exposure in this case is approximately
$95,000.00 (NINETY-FIVE THOUSAND AND NO/00 DOLLARS).

Dr. Abdo Husseiny, et al v. United Gas Pipeline Company, et al.

This is a class action lawsuit filed in 1994 as a result of a gas leak in St.
John the Baptist Parish in Louisiana. Approximately 7858 plaintiffs have joined
the class and are seeking damages ranging from $500.00 to $2500.00 each. The
liability portion of the case was tried to the bench. The court found Woodson
75% at fault and assessed punitive damages on a one to one ratio. Punitive
damages are uninsured. The case was appealed to the Fifth Circuit Court of
Appeals and writs were denied. We are currently negotiating with our underwriter
to approach the plaintiff with a settlement offer in which the entire case
(including punitives) would be settled within policy limits with Woodson
offering a cash contribution to the settlement. Such cash contribution would not
have a material impact on the operations of the Company. If we do not reach a
settlement, this case would begin trial in March of 1999. For the court to hear
all 7858 cases, trial could potentially extend for three to seven years.
169
SCHEDULE 7.6(d)
RIGHTS IN PROPERTIES; LIENS

ALL OF THE PROPERTY AND COLLATERAL OF THE BORROWERS AND THEIR SUBSIDIARIES
WHICH ARE REASONABLY NECESSARY FOR THE OPERATION OF THEIR BUSINESSES ARE IN GOOD
WORKING CONDITION AND ARE MAINTAINED IN ACCORDANCE WITH PRUDENT BUSINESS
STANDARDS WITH THE FOLLOWING EXCEPTION:

The Atchafalaya Bay is currently out of class and in process of being
refurbished. The Company's intention is to spend an additional $2,000,000 by
March 31, 1999, to bring the vessel into class and ready to be a first class
Jetting Barge.
170
SCHEDULE 7.9
DEBT AND LIENS

The Borrowers and their Subsidiaries have no Debt as defined in the Credit
Agreement, except as disclosed below:

- -----------------------------------------------------------------------------------
LENDER COLLATERAL/LIEN
- -----------------------------------------------------------------------------------

1. MR. & MRS. MARCUS DICKSON 3 1/2 acres of land @
MORTGAGE-Dickson GMP 4001 Woodland Highway
$313,786 OUTSTANDING AT 11-30-98 New Orleans, LA

2. TRANSAMERICA INSURANCE FINANCE- Unsecured
TransCoastal Marine Services, Inc.
$2,042,730 OUTSTANDING AT 11-30-98

3.
(Intentionally Deleted)

4. ENRON CAPITAL & TRADE RESOURCES Subordinated lien on all Equipment and
CORP.-TransCoastal Marine Services, Accounts Receivables
Inc.
$20,000,000 SUBORDINATED DEBT IN
PLACE AT CLOSING

5. HELLER FINANCIAL, INC.-TransCoastal First lien on Certain Marine Vessels and
Marine Services, Inc. other Non-marine Equipment
$35,000,000 TERM LOAN IN PLACE AT
CLOSING

6. WOODSON FAMILY-Woodson Company Unsecured
$1,091,907 OUTSTANDING AT 11-30-98

7. NEW COURT FINANCIAL-Dickson GMP Forklift
$73,513 OUTSTANDING AT 11-30-98

8. NEW COURT FINANCIAL-DICKSON GMP Forklift
$75,298 OUTSTANDING AT 11-30-98

9. LCA FINANCIAL-DICKSON GMP 990 CFM Air Compressor
Dickson GMP $46,853 OUTSTANDING AT
11-30-98
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------

171
SCHEDULES 7.10
TAXES

The Borrowers and their Subsidiaries have the following pending federal and
state tax investigations underway:

---------------------------------------------------------------------------------
ENTITY AND YEARS UNDER INVESTIGATION TYPE OF TAX AND TAXING AUTHORITY
=================================================================================

1. CSI - Years ending May 31, 1996 Federal Income Tax-I.R.S.
and 1997

2. Red Fox of New Iberia, Inc. - Years
ending December 31, 1996, 1997, 1998 Sales Tax-State of Louisiana

3. HBH, Inc. - Years ending December
31, 1995 and 1996 Sales Tax-State of Louisiana

4. Dickson GMP Limited, Inc. - Years
ending December 31, 1994, 1995, and
1996 Sales Tax-State of Louisiana
---------------------------------------------------------------------------------

172

SCHEDULE 7.14
SUBSIDIARIES

NAME STATE OF INCORPORATION % OWNERSHIP
- ---- ---------------------- -----------

TransCoastal Marine Services of LA, Inc. Louisiana 100%

The Red Fox Companies of New Iberia, Inc. Louisiana 100%

Woodson Construction Company Louisiana 100%

Hargett Mooring & Marine, Inc. Louisiana 100%

EnviroSystems, Inc. Louisiana 100%

Kori Corporation Louisiana 100%

CSI Hydrostatic Testers, Inc. Delaware 100%

TransCoastal Vessels, Inc. Delaware 100%

TransCoastal Ventures, Inc. Delaware 100%
TransMar, LLC Delaware 60%

Dickson GMP International, Inc. Louisiana 100%

Dickson Marine, Inc. Louisiana 100%
Dickson Nigeria, Ltd. Nigeria 100%
Servicios y Construcciones Petroleras
Ventura, C.A. Venezuela 100%
Ventura Resources, Inc. Louisiana 100%

173

SCHEDULE 7.20

ENVIRONMENTAL MATTERS

(a) None known

(b) None known

(c) Hazardous Waste such as: spent paint and solvents are stored in specific
areas for transportation to approved disposal facilities. TCMS Senior
Environmental Specialist has inspected the disposal facility for compliance
with regulations and permits.

(d) None known

(e) None known

(f) None known

(g) None known

(h) None known
174
SCHEDULE 7.22
INSURANCE COVERAGE

PLease see attached.

175
TRANSCOASTAL MARINE SERVICES, INC.
COMPREHENSIVE GENERAL LIABILITY

LIMITS OF LIABILITY: $1,000,000 PER OCCURRENCE
$2,000,000 GENERAL AGGREGATE
$2,000,000 PRODUCTS/COMPLETED OPS AGGREGATE
$1,000,000 FIRE LEGAL LIABILITY
$ 5,000 MEDICAL PAYMENTS PER PERSON

PREMIUM BASIS: ESTIMATED GROSS RECEIPTS: $167,300,000.

RATE/DEDUCTIBLE OPTIONS:

DEDUCTIBLE STOP LOSS RATE PREMIUM TAX TOTAL
- ---------- --------- ---- ------- --- -----

$25,000 $125,000 .1804% $301,809 $15,090.45 $316,899.45
$25,000 $250,000 .165% $276,045 $13,802.25 $289,847.25
$25,000 $NIL .150% $250,950 $12,547.50 $263,497.50
$50,000 $300,000 .135% $225,855 $11,292.75 $237,147.75
$50,000 $NIL .120% $200,760 $10,038.00 $210,798.00

COVERAGE INCLUDES: ACTIONS OVER
FULL OCCURRENCE FORM, INCLUDING PRODUCTS/COMPLETED OPERATIONS
BROAD FORM GENERAL LIABILITY, ISO DEFINITION OF INSURED CONTRACT
BROAD FORM NAMED INSURED
INSURED OPERATIONS: "ALL OPERATIONS OF NAMED INSURED & SUBSIDIARIES"
NO EXCLUSION FOR PUNITIVE DAMAGES
"PER PROJECT" AND "PER LOCATION" ENDORSEMENT AVAILABLE AS REQUESTED
DEFENSE IS IN ADDITION TO POLICY LIMITS
XCU HAZARDS; UGR&E; BLOWOUT & CRATERING
WORLDWIDE TERRITORY (FOR SUITS BROUGHT WITHIN THE U.S.)
SEEPAGE & POLLUTION - TIME ELEMENT - 7-DAY DISCOVERY, 30-DAY REPORTING
BLANKET WAIVER OF SUBROGATION, ADDITIONAL INSURED & 60-DAY N.O.C.
PRIMARY INSURANCE CLAUSE AS REQUIRED BY CONTRACT
IN REM, GULF OF MEXICO, AND NON-OWNED WATERCRAFT EXTENSIONS
ALL OWNED BOATS 26' & UNDER (INCLUDING DEBRIS REMOVAL)
NO EXCLUSION UNDER CONTRACTUAL FOR WORK WITHIN 50' OF RAILROADS
CROSS SUITS
LIMITED EMPLOYEE BENEFITS LIABILITY - $1,000,000 AGGREGATE
CARE, CUSTODY, CONTROL EXCLUSION DELETED
DELETE THE "DAMAGE TO YOUR WORK" EXCLUSION (WORK MUST HAVE BEEN DELIVERED TO THE
BUYER, AND THE ASSURED MUST BE LEGALLY LIABLE TO PAY). THIS ADDITIONAL
COVERAGE HAS A SEPARATE $25,000 DEDUCTIBLE PER CLAIM.
FELLOW EMPLOYEE EXCLUSION DELETED
UNINTENTIONAL ERROR/FAILURE TO DISCLOSE CLAUSE
SHIPREPAIRERS LEGAL LIABILITY
ENVIROSYSTEMS: RETRO DATE OF 6/30/94
REMOVE PROFESSIONAL EXCLUSION FOR TRANSMAR ONLY, SUBJECT TO $50,000 DED.

EXCLUDING: P&I, PCB'S, ASBESTOS, E&O, D&O, LEASED EMPLOYEES, FORMALDEHYDE,
NUCLEAR, EMPLOYMENT PRACTICES.

SECURITY: STEADFAST INSURANCE COMPANY
ZURICH-AMERICAN INSURANCE GROUP (BEST RATING A+:XIV)

13
176
TRANSCOASTAL MARINE SERVICES, INC.

COMMERCIAL AUTO COVERAGE

LIABILITY :$1,000,000 COMBINED SINGLE LIMIT
MEDICAL PAYMENTS :$5,000
UNINSURED MOTORISTS :$1,000,000
HIRED AND NON-OWNED :$1,000,000 COMBINED SINGLE LIMIT
COMPREHENSIVE :SEE BELOW
COLLISION :SEE BELOW
- --------------------------------------------------------------------------------

DESCRIPTION OF VEHICLES: PER SCHEDULE PROVIDED BY INSURED

AUTO LIABILITY RATING BASE: POWER UNITS - 125.
$5,000 DEDUCTIBLE ON LIABILITY.
COMPOSITE RATE AT $516.32.

AUTO PHYSICAL DAMAGE: $500 DEDUCTIBLE COMPREHENSIVE &
$500 COLLISION FOR ALL LIGHT TRUCKS
AND PRIVATE PASSENGER UNITS, MODEL
YEAR 1994 AND NEWER. $5,000 DEDUCTIBLE
COMPREHENSIVE AND COLLISION FOR ALL
OTHER UNITS. RATING BASE: 75 UNITS.
COMPOSITE RATE AT $270.

PREMIUM: $74,515.00 LIABILITY/MED PAY/U.M.
$20,249.00 PHYSICAL DAMAGE
----------
$94,764.00 TOTAL

COVERAGES INCLUDE: SYMBOL 1 ON LIABILITY - ALL AUTOS
BLANKET WAIVER OF SUBROGATION
BLANKET ADDITIONAL INSURED
BLANKET PRIMARY INS CLAUSE
60-DAY NOTICE OF CANCELLATION
HIRED/NON-OWNED COVERAGES, INCLUDING PHYSICAL DAMAGE
ON RENTAL CARS ($35,000 PD LIMIT)
BROAD FORM NAMED INSURED
FELLOW EMPLOYEE COVERAGE
MCS-90 & STATE FILINGS AVAILABLE AS REQUIRED
LIMITED POLLUTION - VEHICLE OVERTURN OR COLLISION
CA9948 - BROADENED POLLUTION
UNINTENTIONAL FAILURE TO DISCLOSE
EMPLOYEES AS ADDITIONAL INSUREDS

SECURITY: ZURICH AMERICAN INSURANCE COMPANY OF ILLINOIS 10/12/98
ZURICH-AMERICAN INSURANCE GROUP (BEST RATING A+:XIV)

15
177
TRANSCOASTAL MARINE SERVICES, INC.
HULL AND PROTECTION & INDEMNITY

I. HULL & MACHINERY: TOTAL VALUE OF $74,772,000 PER ATTACHED SCHEDULE
INCLUDING COLLISION & TOWERS
BREAKDOWN: WOODSON $ 2,039,500
HBH, INC. $ 24,865,000
CSI HYDRO. $ 24,195,000
RED FOX $ 972,500
TRANSCOASTAL $ 22,700,000
SPUD UNITS $ 665,000

DEDUCTIBLE: $5,000 FOR ALL VESSELS, EXCEPT:
$50,000 FOR ALL VESSELS VALUED OVER $1,000,000

- -------------------------------------------------------------------------------

II. PROTECTION & INDEMNITY: $1,000,000 LIMIT PER OCCURRENCE
INCLUDING EXCESS TOWERS & COLLISION
SP-23 FORM

DEDUCTIBLE: $10,000

- -------------------------------------------------------------------------------

PREMIUM: WOODSON: $ 40,142 HULL $ 30,240 P&I
HBH, INC.: $226,619 HULL $ 73,440 P&I
CSI: $195,423 HULL $ 12,960 P&I
RED FOX: $ 20,663 HULL $ 21,600 P&I
TRANSCOASTAL: $177,980 HULL $ 13,770 P&I
-------- --------
TOTAL: $660,827 HULL $152,010 P&I

PREMIUM TOTAL: $812,837.00

HULL DEDUCTIBLE OPTIONS: $50,000 DEDUCTIBLE - 10% PREMIUM CREDIT
$100,000 DEDUCTIBLE - 15% PREMIUM CREDIT

SECURITY: MOAC/BOSTON OLD COLONY (BEST RATING: A-:XIV) 10/15/98

16
178
HULL AND PROTECTION & INDEMNITY - TERMS & CONDITIONS

INCLUDES: AGREED VALUE ON HULL AMOUNTS
PARTS REMOVED CLAUSE
AFFILIATED COMPANIES CLAUSE
BLANKET ADD'L INSURED & WAIVER OF SUBROGATION, 60-DAY N.O.C.
BLANKET PRIMARY INSURANCE CLAUSE
AUTOMATIC ACQUISITION CLAUSE FOR PURCHASE OR CHARTER
PRIVILEGE TO CHARTER CLAUSE
CROSS LIABILITY CLAUSE.
CONTRACTUAL LIABILITY
SEEPAGE & POLLUTION (B.I. & CARGO), EXCLUDING O.P.A., CERCLA
INCHMAREE EXTENDED TO PROVIDE COVERAGE FOR NEGLIGENCE OF
CHARTERS AND/OR REPAIRERS, ALSO EXTENDED TO PROVIDE
COVERAGE FOR CONTACT WITH AIRCRAFT.
BLOWOUT & CRATERING
DELIBERATE DAMAGE (POLLUTION) INCLUDING EQUIPMENT, GEAR,
MACHINERY DAMAGE
BURIAL EXPENSES CLAUSE
IN REM/IN PERSONAM LIABILITY
CARGO LEGAL LIABILITY
VESSEL IN DISTRESS CLAUSE
SISTERSHIP CLAUSE
TANKERMANS CLAUSE
DELETE THE EXCEPTIONS "OTHER THAN AN ASSURED, AND "AS OWNER
OF VESSEL" AS REQUIRED BY CONTRACT
SUE & LABOR PROVISIONS NOT TO APPLY TO ADDITIONAL INSURED IF
REQUIRED IN CONTRACT
REPAIRS & ALTERATIONS CLAUSE
TOWAGE EXCLUSIONS DELETED
BOOM COVERAGE ENDORSEMENT, OVERWEIGHT EXCLUSION DELETED
BROAD FORM NAMED INSURED ENDORSEMENT
STRIKES, RIOTS & CIVIL COMMOTIONS, & MALICIOUS DAMAGE CLAUSES
EXTENDED ADVENTURES & PERILS CLAUSE
EACH VESSEL DEEMED TO BE SEPARATELY INSURED
LEASED EQUIPMENT CLAUSE
SUBJECT TO AMERICAN HULL INS. SYNDICATE LINER NEGLIGENCE
CLAUSE
VOLUNTARY REMOVAL OF WRECK/DEBRIS
NO EXCLUSION FOR PUNITIVE DAMAGES

THIS INSURANCE AUTOMATICALLY EXTENDS TO COVER ANY VESSELS AND/OR CRAFT
OF A SIMILAR AGE & NATURE TO THAT INSURED HEREUNDER, WHICH HAVE BEEN
PURCHASED, LEASED, RENTED, TIME OR BAREBOAT CHARTERED BY INSURED
SUBJECT TO ADVICE TO UNDERWRITERS, AT TERMS AND RATES TO BE AGREED.

POLICY WILL PROVIDE LIABILITY COVERAGE FOR INSURED COMPANIES, EXCESS OF
THE $500,000 LIMIT CARRIED BY McDONOUGH MARINE, UP TO $1,000,000
COMBINED TOTAL LIMITS. INSURED COMPANIES TO BE NAMED & WAIVED BY
McDONOUGH MARINE. COVERAGE APPLIES ONLY TO RENTED BARGES.

17
179

TRANSCOASTAL MARINE SERVICES, INC.

CHARTERERS' LEGAL LIABILITY
WHARFINGERS LIABILITY

LIMIT OF LIABILITY: $ 1,000,000

DEDUCTIBLE: $25,000

RATE: FLAT, NO ADJUSTMENT

PREMIUM: $15,000

NOTE: COVERAGE IS PROVIDED FOR BOTH DOMESTIC AND FOREIGN OPERATIONS. FOR
FOREIGN LIABILITY, UNDERWRITERS REQUIRE A COPY OF THE HULL/P&I POLICY
SERVING AS PRIMARY COVERAGE FOR TWO LIFTBOATS CHARTERED BY DICKSON GMP
INT'L LOCATED OFFSHORE NIGERIA

SECURITY: MOAC/BOSTON OLD COLONY

10/8/98

18
180

TRANSCOASTAL MARINE SERVICES, INC.

WATER QUALITY INSURANCE SYNDICATE
VESSEL POLLUTION COVERAGES

LIMITS OF LIABILITY:

OIL POLLUTION ACT OF 1990 - TO $5,000,000 PER VESSEL OR STATUTORY
LIMIT

CERCLA ($300 PER GROSS TON - $500,000 LIMIT)

SCHEDULE OF VESSELS: SEE ATTACHED

BLANKET WAIVER OF SUBROGATION AND ADDITIONAL INSURED.
SPUD PARGE BUYBACK ENDORSEMENT B
FOREIGN TRADE CLEAN-UP ENDORSEMENT - MEXICO & TRINIDAD

LIMITED OPA '90 CIVIL PENALTY CLAUSE - $500 DEDUCTIBLE/ACCIDENT

ANNUAL PREMIUM $ 38,001.77 OPA/CERCLA
1,140.05 CIVIL PENALTY
-----------
$ 39,141.82
10/22/98

19
181

TRANSCOASTAL MARINE SERVICES, INC.
COMMERCIAL UMBRELLA

LIMIT OPTIONS: $ 50,000,000 EXCESS OF ALL UNDERLYING COVERAGES

PREMIUM: $ 400,000

TERMS & CONDITIONS: $100,000 S.I.R.
FOLLOWS FORM OF UNDERLYING COVERAGES
EXCLUDES PUNITIVE DAMAGES
DROP DOWN ENDORSEMENT, REMOVING REQUIREMENT TO MAKE
REASONABLE EFFORT TO REINSTATE EXHAUSTED LIMITS
BLANKET WAIVER OF SUBROGATION
BLANKET ADDITIONAL INSURED
BLANKET 60-DAY NOTICE OF CANCELLATION
REMOVAL OF EXCLUSION FOR TREBLE & MULTIPLE DAMAGES

UNDERLYING COVERAGES AND LIMITS: DOMESTIC & FOREIGN
EMPLOYERS LIABILITY $1,000,000/1,000,000/1,000,000
MARITIME EMPLOYERS LIABILITY $1,000,000/1,000,000
GENERAL LIAB./SHIPREPAIRERS $1,000,000/2,000,000/2,000,000
AUTOMOBILE LIABILITY $1,000,000 C.S.L.
PROTECTION & INDEMNITY $1,000,000
CHARTERERS/WHARFINGERS $1,000,000
VESSEL POLLUTION/WQIS $5,000,000

SECURITY: RELIANCE NATIONAL INSURANCE COMPANY (A-XIII) 10/8/98
BOSTON OLD COLONY/MOAC (A-XIV)
ZURICH INSURANCE COMPANY, U.S. BRANCH

182

TRANSCOASTAL MARINE SERVICES, INC.
COMMERCIAL PROPERTY

SPECIAL "ALL RISK" FORM, EXCLUDING QUAKE
BLANKET LIMITS, AGREED AMOUNT ENDORSEMENT (SUBJECT TO SURVEY AT
INSUROR'S EXPENSE TO DETERMINE ACCEPTABILITY OF LIMITS)
$250,000 SUBLIMIT ON FLOOD
$5,000 DEDUCTIBLE / $10,000 FOR FLOOD
INCLUDES BLANKET WAIVER OF SUBROGATION, ADDITIONAL INSURED, 60-DAY NOC
60% COINSURANCE LOSS OF RENTS
$10,000 AUTOMATIC COVERAGE FOR POLLUTION CLEAN-UP

TOTAL ALL VALUES, PER SCHEDULE: $5,174,500 REAL PROPERTY
$1,761,850 CONTENTS/PERSONAL PROPERTY
$ 162,950 DICKSON EDP EQUIPMENT
$ 284,000 LOSS OF RENTS
$ 250,000 VALUABLE PAPERS
$ 250,000 FLOOD SUBLIMIT
----------
TOTAL $7,883,300

ADJUSTABLE RATE: .28 PER $100 OF VALUE

ADDITIONAL COVERAGES: ORDINANCE OR LAW $1,000,000
BLANKET EXTRA EXPENSE $1,000,000

PREMIUM: BUILDINGS, CONTENTS, ETC. $22,073.00
ORDINANCE/EXTRA EXPENSE $ 7,000.00 FLAT
TOTAL ----------
$29,073.00

SECURITY: MOAC/BOSTON OLD COLONY (A-:XIV) 10/9/98

21
183
TRANSCOASTAL MARINE SERVICES, INC.

BUILDER'S RISK COVERAGE

LIMIT OF LIABILITY: $5,000,000 PER DISASTER
$1,000,000 TRANSIT COVERAGE
$2,000,000 FLOOD & QUAKE
$2,000,000 TRENCHING SUBLIMIT

DEDUCTIBLE: $25,000 ANY ONE JOB, INCLUDING FLOOD & QUAKE
$5,000 TRANSIT

TERMS & CONDITIONS: QUARTERLY REPORTING OF INSTALLATION RECEIPTS TO
INCLUDE VALUE OF CUSTOMERS' PIPE

MOAC REQUIRES ADVANCE NOTICE OF ANY JOB OVER
$2,000,000 IN SIZE TO BE COVERED HEREUNDER

BLANKET WAIVERS OF SUBROGATION

RATE: A) .10% - LAND

B) .20% - WATER

MINIMUM & DEPOSIT PREMIUM: $10,000.00

SECURITY: MOAC/BOSTON OLD COLONY (A-:XIV) 10/8/98

22
184

TRANSCOASTAL MARINE SERVICES, INC.

HULL BUILDER'S RISK COVERAGE

LIMIT OF LIABILITY: $3,000,000

RATE: .08 PER MONTH ON COMPLETED VALUES

DEDUCTIBLE PER ACCIDENT: 1%

REPORTING: MONTHLY

MINIMUM & DEPOSIT PREMIUM: $2,600.00

SECURITY: MOAC/BOSTON OLD COLONY (A-:XIV) 10/8/98

23
185

TRANSCOASTAL MARINE SERVICES, INC.
TRANSIT COVERAGE

LIMITS: $500,000 ON EQUIPMENT OF OTHERS BEING TRANSPORTED ABOARD
INSURED'S OWNED/OPERATED WATERCRAFT

COVERAGES: ALL RISK, INCLUDING THEFT
WATERCRAFT EXCLUSIONS DELETED

DEDUCTIBLE: $5,000

PREMIUM: $5,000.00 FLAT

SECURITY: MOAC/BOSTON OLD COLONY (A-:XIV) 10/8/98

24
186

TRANSCOASTAL MARINE SERVICES, INC.
CONTRACTORS EQUIPMENT COVERAGE

LIMITS OF LIABILITY: $15,004,844 OWNED EQUIPMENT (PER SCHEDULE)
$2,000,000 RENTAL EQUIPMENT
$1,000,000 LIFT LIABILITY, OVERWEIGHT EXCL.
DELETED
$250,000 FLOOD SUBLIMIT

DEDUCTIBLE: 2% OF VALUES, MINIMUM $1,000 AND MAXIMUM $10,000
$25,000 ON BOOM FOR RED FOX CRANE VALUED $650,000
$25,000 ON BOOM FOR HBH RENTAL CRANE VALUED $695,000
$5,000 ON RENTAL EQUIPMENT
$10,000 ON DOMESTIC & $25,000 ON FOREIGN LIFT LIABILITY
$10,000 ON FLOOD

RATES: .58% OF VALUE ON OWNED EQUIPMENT
.78% OF COST OF HIRE ON RENTAL EQUIPMENT
1.00% WITH BOOM & OVERWEIGHT COVERAGE

TERMS & CONDITIONS: WATERBORNE COVERAGE PROVIDED
ANNUAL ADJUSTMENT ON RENTAL EQUIPMENT
BLANKET WAIVER OF SUBROGATION
BLANKET ADDITIONAL INSURED
WORLDWIDE COVERAGE
60-DAY NOTICE OF CANCELLATION
BLANKET LIMITS, AGREED AMOUNT ENDORSEMENT
(SUBJECT TO SURVEY AT COMPANY EXPENSE)

PREMIUM: $87,028.00 OWNED EQUIPMENT

$5,000.00 M&D ON RENTAL EQUIPMENT

$15,000.00 FLAT ON LIFT LIABILITY
-----------

TOTAL $107,028.00

SECURITY: MOAC/BOSTON OLD COLONY (A-:XIV) 10/8/98

25
187

TRANSCOASTAL MARINE SERVICES, INC.
AIRCRAFT LIABILITY AND HULL PHYSICAL DAMAGE

AIRCRAFT INSURED: 1981 CESSNA 185 SEAPLANE, #N6860N

LOCATION: BELLE CHASSE, LA

PILOT INFORMATION: DENNIS SISUNG, OR ANY PILOT WITH 1,000 HOURS
TOTAL TIME, 350 HOURS IN SEAPLANE, AND 50 IN MAKE & MODEL.

LIMITS: $5,000,000 CSL LIABILITY
$1,000,000 SUBLIMIT PER PASSENGER
$120,000 HULL VALUE

DEDUCTIBLE: $250 NOT-IN-MOTION
$12,000 IN MOTION

INCLUDES: BLANKET WAIVER OF SUBROGATION, ADDITIONAL INSURED, AND
60-DAY NOTICE OF CANCELLATION

PREMIUM: $6,549.00 PREMIUM (25% MINIMUM EARNED)
$ 250.00 POLICY FEE
---------
$6,799.00 TOTAL

SECURITY: U.S. SPECIALITY (A+:VIII) RANGER (A-:VIII) 10/8/98

26
188

ENVIROSYSTEMS, INC. - POLLUTION & PROFESSIONAL
(GENERAL LIABILITY IS PROVIDED WITHIN THE STEADFAST
QUOTATION FOR TRANSCOASTAL)

COVERAGE FORM: CLAIMS-MADE

RETROACTIVE DATE: 7/26/93 ON POLLUTION/PROFESSIONAL

LIMIT: POLLUTION/PROFESSIONAL: $1,000,,000 OCCURRENCE/$2,000,000
AGGREGATE

DEDUCTIBLE: POLLUTION/PROFESSIONAL: $25,000

COVERAGES: ZURICH'S PROFESSIONAL ENVIRONMENTAL CONSULTANTS POLICY.
PROFESSIONAL LIABILITY; CONTRACTORS ENVIRONMENTAL IMPAIRMENT
DEFENSE FOR POLLUTION/PROFESSIONAL IS WITHIN POLICY LIMITS
ACTIONS OVER (POLLUTION LIABILITY ONLY)
CIRCUMSTANCE REPORTING WITH NO SUNSET CLAUSE
WORLDWIDE TERRITORY
BROAD FORM CONTRACTUAL INCLUDING VICARIOUS LIABILITY
BLANKET ADDITIONAL INSURED (POLLUTION LIABILITY ONLY)
SPECIFIC WAIVER OF SUBROGATION
60-DAY NOTICE OF CANCELLATION
MUTUAL PRIOR AGREEMENT ON SELECTION OF CLAIMS COUNSEL
CLEAN-UP COSTS
COMPLETE RADIOACTIVE COVERAGE, SUBJECT TO NUCLEAR EXCLUSION
FULL ASBESTOS COVERAGE
MEDIATION CREDIT
NO EXCLUSION FOR SUPERFUND
NO EXCLUSIONS FOR UNDERGROUND STORAGE TANK WORK
PRIMARY INSURANCE WORDING AS REQUIRED BY CONTRACT.
POLICY PROVIDES COVERAGE FOR WORK SUBBED OUT FROM TRANSCOASTAL
COMPANIES
COVERAGE EXCLUSIONS:
FRAUDULENT/INTENTIONAL ACTS
NON-COMPLIANCE WITH STATUTES, ETC.
CROSS LIABILITY
DISCRIMINATION
PATENT/COPYRIGHT INFRINGEMENT
EXPRESS WARRANTIES/GUARANTEES
PUNITIVE DAMAGES
WATERCRAFT/AIRCRAFT
WAR, CIVIL UNREST
PRODUCTS LIABILITY
PROPERTY DAMAGE TO THE NAMED INSURED'S WORK
PROFESSIONAL LIABILITY FOR FAULTY WORKMANSHIP/CONSTRUCTION

EXCLUDING: ANY LOSS AS A RESULT OF SERVICES OR OPERATIONS PERFORMED
AT SITES OWNED/OPERATED BY TRANSCOASTAL COMPANIES

27
189
RATES: POLLUTION/PROFESSIONAL: FLAT

ESTIMATED RECEIPTS: $1,000,000

PREMIUM: POLLUTION/PROFESSIONAL: $ 7,500.00 (FLAT, NO MINIMUM EARNED)
$ 375.00 (TAX)
----------
$ 7,875.00 (TOTAL)

SUBJECT TO: COMPLETED & SIGNED APPLICATION

AVAILABLE: SUPPLEMENTAL REPORTING PERIOD, ADDITIONAL CHARGE TO BE
NEGOTIATED.

SECURITY: STEADFAST INSURANCE COMPANY 10/14/98
(ZURICH-AMERICAN INSURANCE GROUP)

28
190
TRANSCOASTAL MARINE SERVICES, INC.
WORKERS' COMPENSATION COVERAGE
(ALL ENTITIES EXCEPT RED FOX)

COVERAGE A - WORKERS' COMPENSATION: Provides coverage for the statutory
obligation of an employer to provide benefits for employees as required by the
applicable state law or USL&H Act.

COVERAGE B - EMPLOYERS LIABILITY: Protects the insured against liability
imposed by law for injury to employees in the course of employment that is not
compensable under the Worker's Compensation section.
EMPLOYERS LIABILITY LIMIT OF LIABILITY : $1,000,000
----------
MARITIME EMPLOYERS LIABILITY: $1,000,000
----------

- -------------------------------------------------------------------------------

DEDUCTIBLE AND RATE OPTIONS - APPLICABLE TO STATE ACT, USL&H, & JONES ACT:
(RATES APPLY PER $100 OF PAYROLL)

97/98 LOSSES
DEDUCTIBLE RATE PAYROLL PREMIUM W/IN DEDUCT.
---------- ---- ------- ------- ------------

$ 25,000 2.1813 $30,000,000 $654,390 $236,339
$ 50,000 1.8746 $30,000,000 $562,380 $344,839
$100,000 1.597 $30,000,000 $479,100 $441,574
$150,000 1.5007 $30,000,000 $450,210 $451,374
$250,000 1.3997 $30,000,000 $419,910 $451,374

OPTION: $25,000 DEDUCTIBLE ANY ONE ACCIDENT, WITH $475,000 AGGREGATE
STOP LOSS (ADJUSTED AT 1.58% OF W.C. PAYROLL)
RATE: 2.35% OF PAYROLL = $705,029 PREMIUM

EXCROW REQUIRED FOR CLAIMS PAYMENTS IS EQUIVALENT OF THREE DEDUCTIBLES.
LETTER OF CREDIT REQUIRED CAN BE NEGOTIATED - BOTTOM END IS $100,000,
MAXIMUM OF $500,000.

ADDITIONAL COVERAGES:
- --------------------
BLANKET WAIVER OF SUBROGATION
BLANKET ALTERNATE EMPLOYER/BORROWED SERVANT
60-DAY NOTICE OF CANCELATION
USL&H, GULF OF MEXICO AND OUTER CONTINENTAL SHELF ACT ENDORSEMENTS
PAYROLL REPORTED FOR STATES OF LA, TX, CA, AL, MS
OTHER STATES ENDORSEMENT
COVERAGE FOR DOMESTIC EMPLOYEES WORKING TEMPORARILY ABROAD
VOLUNTARY COMPENSATION, FOREIGN VOLUNTARY COMPENSATION
JONES ACT, INCLUDING: IN REM, TWM&C. DEATH ON THE HIGH SEAS
NO EXCLUSION FOR PUNITIVE DAMAGES
NO EXCLUSION FOR OCCUPATIONAL DISEASE
STOP-GAP EMPLOYERS LIABILITY

SECURITY: ZURICH INSURANCE COMPANY, J.S. BRANCH 10/23/98
ZURICH-AMERICAN INSURANCE GROUP (BEST RATING A+:XIV)

9
191
TRANSCOASTAL MARINE SERVICES, INC.
WORKERS' COMPENSATION COVERAGE
THE RED FOX COMPANIES OF NEW IBERIA

COVERAGE A - WORKERS' COMPENSATION: Provides coverage for the statutory
obligation of an employer to provide benefits for employees as required by the
applicable state law or USL&H Act.

MARITIME EMPLOYERS LIABILITY: $25,000

- --------------------------------------------------------------------------------

DEDUCTIBLE: NIL - FIRST DOLLAR

PREMIUM DEVELOPMENT:

CLASSIFICATION CODE PAYROLL RATE PREMIUM
- --------------------------------------------------------------------

IRON WORKS 3040 $5,506,000 4.3814 $241,240
SHIPREPAIR/CONVERSION 6872F $4,848,000 6.7314 326,338
SALESPERSONS 8742 $ 247,000 .4403 1,088
CLERICAL 8810 $1,270,000 .2125 2,699

INCREASED EMPLOYERS LIABILITY LIMITS 2.8% 15,998
MARITIME MINIMUM PREMIUM 4,000
EXPENSE CONSTANT 150
--------
TOTAL ESTIMATED ANNUAL PREMIUM $591,513
DEPOSIT PREMIUM: $ 30,000
LESS CURRENT DEPOSIT: -$ 20,000
ADDITIONAL DEPOSIT DUE: $ 10,000

ADDITIONAL COVERAGES:

BLANKET WAIVER OF SUBROGATION
BLANKET ALTERNATE EMPLOYER
30-DAY NOTICE OF CANCELLATION
USL&H, GULF OF MEXICO AND OUTER CONTINENTAL SHELF ACT ENDORSEMENTS
LIMITED OTHER STATES ENDORSEMENT
COVERAGE FOR DOMESTIC EMPLOYEES WORKING TEMPORARILY ABROAD
JONES ACT, INCLUDING: IN REM, TWM&C, DEATH ON THE HIGH SEAS
NO EXCLUSION FOR OCCUPATIONAL DISEASE
CANNOT PROVIDE VOLUNTARY COMPENSATION & STOP GAP ENDORSEMENTS

SECURITY: LOUISIANA WORKERS' COMPENSATION CORP. (B++:VIII) 10/8/98

10
192
SCHEDULE 7.23

HEDGING TRANSACTIONS

NONE
193
SCHEDULE 7.25
MATERIAL DEBT AGREEMENTS

The Borrowers and their Subsidiaries have the following material Debt
Agreements:

- -----------------------------------------------------------------------------------
LENDER COLLATERAL/LIEN
- -----------------------------------------------------------------------------------

1. MR. & MRS. MARCUS DICKSON 3 1/2 acres of land @
MORTGAGE-Dickson GMP 4001 Woodland Highway
$313,786 OUTSTANDING AT 11-30-98 New Orleans, LA

2. TRANSAMERICA INSURANCE FINANCE- Unsecured
TransCoastal Marine Services, Inc.
$2,042,730 OUTSTANDING AT 11-30-98

3.
(Intentionally Deleted)

4. ENRON CAPITAL & TRADE RESOURCES Subordinated lien on all Equipment and
CORP.-TransCoastal Marine Services, Accounts Receivables
Inc.
$20,000,000 SUBORDINATED DEBT IN
PLACE AT CLOSING

5. HELLER FINANCIAL, INC.-TransCoastal First lien on Certain Marine Vessels and
Marine Services, Inc. other Non-marine Equipment
$35,000,000 TERM LOAN IN PLACE AT
CLOSING

6. WOODSON FAMILY-Woodson Company Unsecured
$1,091,907 OUTSTANDING AT 11-30-98

7. NEW COURT FINANCIAL-Dickson GMP Forklift
$73,513 OUTSTANDING AT 11-30-98

8. NEW COURT FINANCIAL-DICKSON GMP Forklift
$75,298 OUTSTANDING AT 11-30-98

194
SCHEDULE 9.2
DEBT AGREEMENTS AND LIENS

The Borrowers and their Subsidiaries have the following material Debt
Agreements:

- -----------------------------------------------------------------------------------
LENDER COLLATERAL/LIEN
- -----------------------------------------------------------------------------------

1. MR. & MRS. MARCUS DICKSON 3 1/2 acres of land @
MORTGAGE-Dickson GMP 4001 Woodland Highway
$313,786 OUTSTANDING AT 11-30-98 New Orleans, LA

2. TRANSAMERICA INSURANCE FINANCE- Unsecured
TransCoastal Marine Services, Inc.
$2,042,730 OUTSTANDING AT 11-30-98

3.
(Intentionally Deleted)

4. ENRON CAPITAL & TRADE RESOURCES Subordinated lien on all Equipment and
CORP.-TransCoastal Marine Services, Accounts Receivables
Inc.
$20,000,000 SUBORDINATED DEBT IN
PLACE AT CLOSING

5. HELLER FINANCIAL, INC.-TransCoastal First lien on Certain Marine Vessels and
Marine Services, Inc. other Non-marine Equipment
$35,000,000 TERM LOAN IN PLACE AT
CLOSING

6. WOODSON FAMILY-Woodson Company Unsecured
$1,091,907 OUTSTANDING AT 11-30-98

7. NEW COURT FINANCIAL-Dickson GMP Forklift
$73,513 OUTSTANDING AT 11-30-98

8. NEW COURT FINANCIAL-DICKSON GMP Forklift
$75,298 OUTSTANDING AT 11-30-98